Blackstone to buy former Sears Tower in Chicago for $1.3 billion

NEW YORK (Reuters) - The Blackstone Group LP (BX.N) agreed on Monday to buy the Willis Tower, the former Sears Tower that for 25 years was the world's largest building, in a deal that features an observation deck as a tourist attraction and unique revenue stream.

The acquisition was valued at $1.3 billion (880 million pounds), making it the highest price paid for a U.S. office tower outside of New York, according to MarketWatch, which first reported the news.

The 110-story Willis Tower at 233 South Wacker Drive is the second-tallest U.S. office building with 3.8 million square feet (0.35 million square meters) of space, and fifth-tallest office building in the world, Blackstone said in a news release.

Blackstone has agreed to buy the property, which features a top Chicago tourist attraction in the Skydeck on the 103rd floor, from New York investors Joseph Chetrit and Joseph Moinian and Skokie, Illinois-based American Landmark Properties, MarketWatch said.

The Skydeck attracts 1.6 million visitors annually, a draw that Blackstone hopes to build on. The Skydeck includes the "Ledge," glass cubes that extend from the Willis Tower with an unobstructed downward view because of the see-through flooring.

"We are bullish on Chicago as companies expand within and move into the city and look for first-class office space," said Jacob Werner, a managing director in Blackstone's real estate group. "We see great potential in further improving both the building's retail operations and the tourist experience."

Blackstone plans to revamp the Skydeck is a nod to the growing popularity of observation decks, MarketWatch said. The Empire State Building took in nearly 40 percent of its revenue from 4.3 million visitors, or about $82 million in income after expenses. The Willis Tower gets more than $25 million annually.

The agreement was between Blackstone Real Estate Partners VII and 233 South Wacker Drive LLC. The owners paid $841 million for the property in 2004.

On a square-foot basis, the price for the Willis Tower was about $340, a fraction of what trophy towers fetch in major cities, MarketWatch said.

Douglas Harmon of Eastdil Secured was the exclusive representative on the transaction, Blackstone said.

(Reporting by Herbert Lash; Editing by Marguerita Choy)