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New 15-year Lease Keeps Playboy Based in Chicago


August 23, 2006

Read Time

3 minutes


BY Susan Diesenhouse

Although Playboy Enterprises Inc. has offices in New York and Los Angeles, its headquarters will remain in Chicago, where it has signed a new 15-year lease on 95,000 square feet at 680 N. Lake Shore Drive, according to its landlord, Golub & Co.

“We like the location, and it keeps getting better,” said Christie Hefner, Playboy’s president and chief executive. “The restaurants, transportation access, those are big pluses.”

The company occupies the 15th and 16th floors at Lake Shore Plaza, a building it’s been in since 1989.

“The space is dramatic, centered around an atrium where we host events,” Hefner said. “I look into the offices so I can see and be seen.”

“Playboy is an important tenant,” said Golub President and CEO Michael Newman, who negotiated the lease that takes effect next year with Lee Golub, executive vice president, and John Ferguson, a senior vice president. “We’re excited they’re staying in the building and keeping their headquarters in the city.”

U.S. Equities Realty LLC, which is also based in Chicago, represented Playboy in the negotiations.

Gross office rents in the Streeterville complex range from about $25 to $30 a square foot a year. Only about 20,000 square feet is vacant. Built in 1923 as the American Furniture Mart, the 2.2 million-square-foot property has 426,000 square feet of offices, 60,000 square feet of retail, public parking for 331 cars and about 400 condominiums.

“Chicago is home,” said Hefner, explaining why she didn’t relocate the headquarters, though she cut the amount of space down from 125,000 square feet. “It’s great for those of us who spend time on both coasts.”

Chicago has about half of the Fortune 500 headquarters it had in 1975, but with about 30 remaining, it ranks second after New York, which has about 145, said William Testa, a senior economist at the Federal Reserve Bank of Chicago.

Headquarters facilities boost the overall economy by purchasing from other businesses equipment and services such as advertising, accounting and consulting. They are big customers at the airports, usually employ highly paid people, support civic causes and raise the city’s name recognition, Testa noted.

Tighter inspections: A new federal rule will tighten environmental inspection standards for those who after Nov. 1 plan to close on a property that might once have been contaminated.

A buyer whose prepurchase property inspection doesn’t meet the new requirements could be liable for the cost of cleaning old pollution, explained James Brusslan, an attorney who directs the environmental law practice for the firm Levenfeld Pearlstein LLC in Chicago.

“They may have to pay millions for an environmental clean-up,” he warned.

To encourage the redevelopment of urban and former industrial sites, Congress amended the Superfund law four years ago to free potential buyers from financial liability for old contamination if they appropriately inspected a site before they bought it. But the definition of “appropriate” assessment was vague.

Last year the U.S. Environmental Protection Agency sharpened the definition to require more data and to be more current. The site investigation must be completed within six months of purchase or within a year if it has been updated, Brusslan said. Owners can no longer rely on old reports.

Although not mandatory, “it requires more work but offers additional protection for the owner against lawsuits,” said Richard Carlson, president of Carlson Environmental Inc.

For instance, the buyer who does not do an investigation that meets the new standard can be liable for clean-up costs if the previous owner or the polluter is not available, Carlson explained. “They can’t shift responsibility back to the government,” he said.

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