2ndUPDATE: CME Looks To Sell Chicago Board Of Trade Building

CHICAGO (Dow Jones)-- CME Group Inc. (CME) said Monday it is looking to sell most of the Chicago Board of Trade building, putting one of the city's most iconic structures on the market.

The disclosure comes less than a week after the exchange operator warned it may leave Illinois to avoid an increase in corporate taxes, though a CME spokesman said selling the Board of Trade building isn't connected to discussions over a potential move.

The sale of the Art Deco building would include some of the trading-floor space where brokers bark out orders for corn and wheat futures. CME plans to lease back the floor space and continue to operate those trading pits, yet veteran traders saw the announcement as another sign of the growing move to electronic trading.

CME said it hired Jones Lang LaSalle Inc. (JLL) and Holly Duran Real Estate Partners LLC to market the north and south towers of the 80-year-old structure, which is topped by a three-story statue of Ceres, the Roman goddess of agriculture and grain. CME will retain ownership of the building's east tower, home to its financial futures markets.

Jamie Parisi, CME's chief financial officer, said in a statement that exiting the real estate business would free up capital for the exchange operator to reinvest in its core derivatives business. Analysts saw the announcement as a chance for CME to cash in on a recovery in corporate real estate.

"We've seen the price per square foot of trophy properties improve over last year and a half, and it could be that CME's looking to monetize that," said Michael Larson, a real estate and interest-rate analyst with Weiss Research. "The question is whether they may be a little too late, if the economy's starting to slump a bit again."

In Chicago, the owners of the Willis Tower -- formerly known as the Sears Tower -- recently began seeking investors to buy all or a portion of the country's tallest skyscraper. Hines Interests has been looking to sell off a stake of a 50-story office building, known as the UBS Tower.

Brian Nagel, executive vice president for commercial real estate services company Colliers International in Chicago, estimates CME could sell the 1.4 million square feet for about $150 square foot, or about $210 million. He said the buyer is likely to be a domestic investment group, such as a pension fund or real estate investment trust.

As part of any deal, the CME said it will aim to secure a 15-year lease on the sale of the facilities it currently uses, and reiterated its commitment to open-outcry trading, which accounted for about 20% of the 3.1 billion futures and options traded on its markets last year.

Over the last decade, the parent of the Chicago Mercantile Exchange has ridden the wave of automation sweeping financial markets, helping to achieve rapid growth in its trading volumes and fueling the acquisition of rivals, including the Chicago Board of Trade in 2007 and New York Mercantile Exchange in 2008. Last summer CME opened a new data center facility in the Chicago suburb of Aurora, Ill., built to house its trade-matching systems as well as the servers of computer-powered trading firms that rank among its busiest customers.

Floor traders, who aren't authorized to speak with media by their employers, said the building going up for sale reinforced a long-held belief that the exchange wants to phase out open-outcry trading, which accounts for less than 15% of the volume in the grain markets right now. They noted the plan for a 15-year lease for the space housing the trading floors was relatively short and expect CME to take aggressive action to diminish the role of the floor starting next summer. In July 2012, an agreement requiring the exchange to consult former members on trading procedures expires.

A CME spokeswoman said the company remains committed to floor trading as long as demand for it remains.

CME became a property owner through its deals for CBOT and Nymex. According to regulatory filings, the company reported a net property value of $786.8 million at the end of 2010, up from the $707.2 million in value estimated for 2008. A spokeswoman for CME said the company isn't planning a sale of the Nymex building in New York City.

A representative for CME also downplayed any connection between the planned sale and any potential move of the corporate home of the world's largest futures exchange operator from Chicago, raised by CME Executive Chairman Terry Duffy last week at the company's annual shareholder meeting.

Duffy said he and Parisi had been examining the possibility of relocating CME's corporate base outside Illinois, after the state in January sharply raised the corporate tax rate as part of efforts to put its finances in order.

CME leaders said they remain concerned about the tax issue, but want to stay in Chicago.

A group of about 25 protesters gathered outside CME Group's Chicago headquarters a few blocks from the Board of Trade building Monday. They decried the company's complaints about state taxes and its warnings about potentially exiting Illinois.

-By Jacob Bunge and Howard Packowitz, Dow Jones Newswires; 312-750-4117; jacob.bunge@dowjones.com

(Eliot Brown, Bob Tita, Andrew Johnson Jr. and Tom Polansek contributed to this article.)

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