The derby among cities and states to nab Sears, Roebuck & Co.`s job-rich Merchandise Group from Chicago is heating up. Chicago`s and Illinois` top government officials say they are determined not to be left in the starting gate.
Contrary to what some business leaders here contend, aides to Gov. James Thompson and Mayor Eugene Sawyer say both have been active in efforts to convince Sears Chairman Edward A. Brennan to keep the Merchandise Group`s 6,000 jobs in Chicago following the sale of Sears Tower.
”Mayor Sawyer has met and spoken over the telephone with Brennan a couple of times,” said Larry Horist, the chief spokesperson for Sawyer`s mayoral election campaign.
”The governor and the mayor both have talked with Brennan and other Sears officials a number of times,” said Jay Hedges, director of the Illinois Department of Commerce and Community Affairs.
Hedges has been designated by Thompson to head the state`s efforts to keep the Merchandise Group, one of the city`s largest employers, from running off to Dallas, Atlanta, Kansas City, Mo., or some other city outside of Illinois.
Sears has said it intends to move the group out of the tower, but Horist said Sawyer is not convinced that the company will go through with the relocation.
Sawyer believes that when Sears officials determine the cost of relocation and the adverse effect that moving 6,000 employes out of the tower will have on the selling price for the 110-story structure, the company will decide to stay put, Horist said. The cost could easily run into the hundreds of millions of dollars, he said.
”The mayor doesn`t think it`s feasible for Sears to empty out Sears Tower and then sell it,” Horist said. ”Unless the company commits to a long- term lease with prospective buyers of the building, it`s going to be a difficult sell, a hard sell.”
Sears put Sears Tower, the world`s tallest building and a symbol of Chicago and America`s business might, up for sale Oct. 31. The move is part of a major corporate restructuirng designed to make the monolithic and sluggish retailing firm more competitive with modern and/or streamlined retailers like K mart Corp., Wal-Mart Stores Inc. and Montgomery Ward & Co.
By selling the tower, Sears also expects to raise money to repurchase some of its stock and, thus, insulate itself against takeover moves by either a competitor or a corporate raider.
Neither Hedges nor city officials would say how far negotiations with Sears have gone or how successful they have been so far.
”Sears is very sensitive about the issue, like any firm in the same situation would be,” Hedges said. ”They don`t want the process discussed publicly and we have agreed to respect their wishes.”
What Hedges and city officials will say about their negotiating efforts is that they are in the process of putting together packages of economic incentives and lists of suitable relocation sites for Sears` consideration when the giant retailer decides what its needs are.
Among the incentives said to be under consideration are:
– Offering Sears a substantial discount on land that either the city or the state now owns or would acquire and sell to Sears for a new Merchandise Group headquarters.
– Granting property tax abatements for the buildings that Sears would build or renovate for the unit.
– Authorizing other inducements, such as tax breaks and/or grants for retraining current Sears employees or hiring new ones.
City writedowns on the cost of land to encourage development have become fairly routine in Chicago. Property tax abatements to encourage development and job creation that might not otherwise occur also are already available under the Cook County assessor`s so-called Class 7 program.
The tax break reduces assessment levels for commercial developments from 38.5 percent to 16 percent of fair market value for the first eight years and to 30 percent for the four years after that.
In addition, the state could declare the site to which Sears relocates a state enterprise zone, which would provide the retailer with a host of sales tax and employee tax breaks.
Among the sites being touted by the city for a new home for Sears`
Merchandise Group are the retailer`s former West Side headquarters at 925 S. Homan Ave. and vacant, city-owned land adjacent to O`Hare International Airport.
Sears officials haven`t put a price tag on the tower, but real estate analysts estimate its value between $750 million and $1.8 billion, making it the biggest sale of a single building ever.
The ultimate selling price, the analysts agree, will depend on what Sears does with the Merchandise Group and the 1.5 million square feet the unit occupies within the tower.
If Sears opts to keep the group in the building, committing to a long-term lease with the new owners, the tower likely will command more than $1 billion, the analysts say.
However, if the company decides to relocate the unit from the tower over a relatively short period of time-two to three years-and is unable to find a tenant or tenants to take the unusually large and specially designed floor spaces it currently occupies, the building likely would command a price closer to the $750 million figure, according to the analysts.
Sears officials say the move of the Merchandise Group from Sears Tower isn`t yet cast in stone. However, Brennan has said that as of now the firm has every intention of doing it.
To continue to keep the merchandise staff, top-heavy with clerical and secretarial personnel, in office space that commands high rents, by virtue of Sears Tower`s location in the hot West Loop office market, would not
”accomplish much” in reducing Sears` currently high operating costs, Brennan has said.
The only space Sears intends to continue to occupy within the tower after it`s sold, Brennan said, is that occupied by the company`s top executives, who along with their secretaries, clerks and administrative assistants comprise a staff of about 600 people.
If Sears must relocate, Sawyer would like the retailer to return the Merchandise Group to its former home in economically depressed North Lawndale, Horist said.
”The mayor favors that option,” Horist said. ”There`s the old, giant Sears plant there at Homan Avenue and Arthington Street that could be renovated or replaced, and there`s a lot of adjacent, vacant land also available. The couple hundred acres of vacant land that the city owns around O`Hare would be a second option.”
Sears moved the bulk of its operations from its sprawling, 55-acre West Side complex when construction of Sears Tower at 233 S. Wacker Dr. was completed in 1974.
Meanwhile, some Chicago business leaders think the O`Hare land would be better suited for the Merchandise Group.
”There`s some 900 vacant acres out there that the city owns adjacent to the airport, more than enough to build whatever kind of facility Sears would want to build,” said a top local executive involved in the city and state efforts to keep Sears in Chicago.
Because of its proximity to O`Hare airport, the site would be very convenient for out-of-town Sears executives and suppliers required to come to Chicago, said the business leader, who requested anonymity.
”With the CTA rapid transit going to O`Hare, it would also be easy for Merchandise Group employees to get to and from work,” he added.
However, Sears` old West Side plant and the O`Hare site are not the only possible sites, according to city and state officials.
”All things being equal, the West Side is where we would like it (the Merchandise Group) to go, but it`s by no means the only site we have in mind,” said Robert Mier, assistant to Sawyer for economic development. ”The bottom line is that we want to keep them (Sears) in Chicago.”
Hedges said the state would prefer to keep the Merchandise Group within Chicago, but if that`s not acceptable to Sears, anywhere else in Illinois would be OK, too.
He declined to pinpoint possible sites outside the city, but one sometimes mentioned by Sears observers as a possibility is the nine-acre site that Sears owns at 7401-47 N. Skokie Blvd. in north suburban Skokie. The site, which contains a vacant three-story office building, used to be the regional headquarters for Sears` Allstate Insurance Co.
Sears had the property up for sale, but recently pulled it off the market and announced that it was considering relocating its catalogue division from Sears Tower to the site.
Sears officials have said they would prefer to keep the Merchandise Group within the city, where the company has been based since it moved here from Minnesota in 1893. The company has said its second preference is the suburban Chicago area.
However, the retailer has not ruled out moving outside the state and, as a result, rumors, some of which have been confirmed by Sears insiders, have been rampant about the company looking closely at such cities as Atlanta, Dallas, Houston, Denver and Kansas City. For the most part, office rentals and housing costs in those cities are cheaper than in Chicago.
A rumor currently circulating among Sears Tower employees and among Sears watchers is that John R. Parsons, vice president of home improvements for Sears, who was named by Brennan to head the relocation efforts, has been making frequent trips to Texas and to Kansas City.
In addition, some Sears officials and out-of-state economic development officials say the company is being deluged with calls and visits from government officials and business leaders in other states expressing interest in Sears, if not making outright offers.
Just to be sure that everyone knows where everyone else stands at this point, the city`s Mier said that he will attempt to set up a face-to-face meeting soon between the mayor, the governer and Brennan.
