$65M downtown development

June 2, 2009
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Former Bank One Operations CenterA proposed incentive deal to kick-start a $65-million development adjacent to the former site of Market Square Arena calls for the city to fund the developer's entire purchase price for two prime parcels. A local developer, Tadd M. Miller, plans to redevelop the long-vacant Bank One operations center (shown here) and a surface parking lot to the west into a mid-rise project with 600 apartments and retail space. His company, TM Miller Enterprises Inc., has a contract to purchase the former bank property and an adjacent 1,600-space parking garage for about $18.5 million, and plans to finance the purchase with a bank loan. The deal calls for the city to make all of the payments on the loan over a term of at least 20 years as part of a so-called “installment� purchase of the parking garage. The developer also would get a 10-year tax abatement worth an estimated $6.6 million. But, if Miller fails to land financing and develop the property as promised within 18 months, all of the parcels would revert to city ownership at no additional cost to taxpayers. The proposal is scheduled for a hearing tomorrow by the Metropolitan Development Commission. The full story is here.
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  • calls for the city to fund the developer’s entire purchase price for two prime parcels

    Is this true? If the city is financing all of it why would, But, if Miller fails to land financing and develop the property as promised within 18 months, all of the parcels would revert to city ownership at no additional cost to taxpayers.

    Miller is expecting financing from Regions Bank to pay for the development. The cities only financial obligations to my knowledge are the purchase of the parking garage and subsequent leasing of 600 spaces to Miller and the 10-year property tax abatement. But by no means is the city underwriting everything.
  • After rereading it I understand. I thought you were saying the city would finance the entire project, not just the the land, definitely more understandable now.
  • Yeah, I live in the old Bank One center, overlooking the massive parking lot that was once MSA. And yeah, to get to downtown, I get to walk right by the jail, city county building, and all those bail bondsmen....

    I'm glad to see that SOMETHING is going to happen in this area, which MIGHT help stir up more development on the MSA site. However, what's the incentive of living here right now? Are there plans for the massive concrete wasteland that is MSA, or are they just going to leave 'as is'?

    To get people to really WANT to move to the immediate east side, you HAVE to move the jail and city county building away from the downtown area. Providing residential zoning in the MSA area is a great idea, but who wants to live right next to the jail and the people associated with it?

    Glad to hear something might actually happen on the MSA site (we'll see...I still doubt it will actually happen), but so much ELSE needs to happen first.
  • Ridiculous. Why develop this parcel before developing the MSA site? For the projects to really work, there has to be continuity of development along Market. It's just foolish to have the break in the city scape between Alabama and New Jersy streets.

    On the positive, development on the east end of downtown is so baddly needed. Glad to see progress in the works - even if not optimally done.

    (Shame on the land owner [Chase Bank, I assume] for letting that parcel sit vacant for years and turn into a drug haven.)
  • Where do they come up with these ideas? I've been waiting over a year just to get MY property taxes adjusted.
  • This is great news for the city.

    I hope the architecture will be (at the least) of the same quality as Kosene & Kosene's proposal for MSA.
  • JG, the sequence of development is probably due to the Bank One site being a little further from the jails. I agree with Mark, this is a huge detriment to the MSA site.
  • Tadd is one of the young up and coming people and a great guy. He has done alot with that side of town putting up other units, profitable. While i dont agree with the city taking risks besides the abatement, lets give him a change, my bets are he pulls it off.
  • You all don't understand very well. One of the reasons the MSA towers failed is because of funding, and not enough interest from buyers. Who wants to be the first in a nice new development thats surrounded by nothing.

    Koesene & Koesene is betting that their development will make that whole block more attractive to future proposals for the MSA site. This isn't a detriment to that site. Development has got to start somewhere. I'm betting that Koesene & Koesene wants to see this successful so that they can use money and foot traffic from that property to attract or develop the MSA site. Just because the MSA site wasn't picked first to be developed - doesn't mean this is a bad thing for Indy or this area.

    Think long term - not immediate!
  • I like it. I think this a great place to start for redeveloping the near eastside of downtown. Honestly, the first step was removing the old southbound on-ramp to the I-70/I-65 collector and the redesign of Market Street east of East Street, so I look at this as step 2. The MSA proper site will be next. Sure the jail(s), the mission, etc are difficult, but Harrison College has already invested in the neighborhood as will others. Best of luck to Mr. Miller. Hope he does well.
  • I'm fairly hopeful of this new development. Tadd Miller is a former city planner, an attorney and is one of the few local developers that has an eye for design. In my conversations with him in the past, it was clear that he actually cared about the finished development long beyond his financing obligations. I'm interested to see what he has in store. This might be good.
  • Considering the current environment, I am a little surprised by the cities interest in providing $18.5 million immediately, and $6.6 million over ten years on a project that will provide real-estate that is in demand in the city. Shouldn't the city allow the private market to provide for the demand instead of subsidizing a particular developer? Is this a creative way to find secondary financing in a distressed capital market? It seem like the city is setting itself up as the real risk taker as a secondary lien holder on a project.
  • Joyce (and others),

    How exactly is this development a detriment to the MSA site?

    Everyone is reading the same article, right? The one that announced 600 apartments and 37,000 sq ft of retail space?

    The one that's being spearheaded by Tadd Miller, a partner at Kosene & Kosene, who just happen to have a substantial investment in that area with several completed developments?

    This is exactly what we want for the area.

    You naysayers are acting like they just announced they're building the world's-largets sewage-treatment facility run by convicts.
  • I hope the project turns out to be homerun for the EAST end of Market St. I'll remain skeptical about THIS project moving forward without a financed plan for MSA. That is thinking LONGTERM.
  • We've got a chicken and egg situation here.

    The city wants to make MSA as attractive as possible. The site is actually sitting pretty and with a couple of strategic adjustments, such as this BOOC development, it becomes even more attractive.

    This is a good sign that the current administration is not thinking small and wants to do the site right.

    We're fortunate that Tadd Miller and co. are willing to invest in the MSA perimeter first, which should lead to a better MSA development, longterm.

    I don't think the timeline to find funding would be so short unless something was already lined up.
  • Also, think about how the financing is being set up. A financier is more likely in this market to gain financing if he has substantial funds from a another source. That source is the City. Also, because the city is throwing it's credit and financial might into the financing options, that means a better or more favorable interest rate for the developer on his financial obligations. The city will own the garage - meaning they will continue to get revenu off of it. Didn't somewhere say that garage was 1350+ parking spots? Thats way more needed for the apartments he's pitching - so the city could eventually make money off of the garage and continue to own it in the future. Making it easier down the line to get rid of it, or enter into another good development venture.

    This is a plus. I hope the design is just not a box filling up the land. I would like to see corners, and edges, and balconies, and maybe terraces half way up to make it visually appealing at different levels, instead of just a cube development.
  • I am rethinking my previous post. If the parking garage is really worth what the city is paying for it (and that is a big if), this is a brilliant idea. Does anyone know what a 1600 spot parking garage is worth in that location?
  • This supposedly revenue-generating parking garage isn't even open during weekend Pacer games, and is rarely open on the weekends at all. This is just another nail in the coffin for the city budget. The city does not have the money and should not be subsidizing development. This is just another piece of the never-ending downtown Ponzi scheme, where subsidized development begets subsidized development. The city is broke. This is really bad for the taxpayers of this city. The proposal should be a non-starter and the MSA site should be sold to the highest bidder.
  • Freelunch,

    What actual evidence do you have that this parking garage doesn't generate revenue?

    (And that's evidence other than your noticing it's rarely open on the weekends at all.)
  • 1. This makes the market square site more appealing and more valuable.

    2. Downtown garages make their money off of monthly parking fees. That garage is near capacity during the workday. I'd be furious if my garage actively marketed special events, as it would put it over capacity during those events and I'd probably be paying when I should have a guaranteed spot. The fact that it's empty on week-ends doesn't mean it's not making money during the week. People don't want a monthly garage that caters to special events and daytrippers.

    3. The concept of continuity of development is actually what's ridiculous not this development. This takes an abandoned eye sore, and potentially turns it into a mid-rise residential development with commercial space. Further, it continues to push development east, following the GREAT progress that's happened along east ohio over the last 10 years.

    4. This makes the market square site more appealing and more valuable.
  • By my calculation the city is paying about $40 per square foot for a parking garage. I know the city owns many other parking garages, but is that a model for effective development stimulation. Every time I park in one of the Circle Center garages and only pay $1.50 for three hours, I feel as though something is wrong. I wonder how much this developer originally paid for the garage. I am back to my belief that this is a creative way to generate capital for a development project. I will continue to vacillate.
  • I think this has the potential to be a great project that will help spur the MSA site development. The city having control of the remaining 1,000 spaces in that parking garage is key to redeveloping MSA along with upgrading this site.
  • Levi,
    Actually, parking garages make more money off of daily rate users, not monthly rate users. Don't believe me? Next time you drive out of your parking garage (if you work downtown), look at the daily rate... multiply that times 20 (for 20 working days in a month, average) and tell me which rate is more. And that's only assuming those daily rate spots don't turnover to other users more than once during the day. Parking garages prefer daily rate users over the monthly rate users, hands down. Why do you think some of the garages around downtown only sell an allotted number of monthly parking spots? They're not doing that to be good samaritans and provide parking for downtown... they're doing that to make sure they will always have enough daily rate users to generate the profit they want. The only exception to this rule, here in Indy, I think would be the Baker & Daniels building... their parking garage is only for tenants... but, I'm sure that revenue is made up somewhere.
  • Just the fact that the normal group of nay-sayers on this blog is split 50/50 on this development means it's a big winner in my mind. I know that several developers have chased that particular building over the past 5-7 years and it took some real creativity for Tadd and the City to make it work this time. The MSA site is not in lower Manhattan where it would just immediately sell and get redeveloped to 'the highest bidder'. Would this happen out there now without City involvement and financial help, the site would end up what it is now - a parking lot. These deals involve an intricate use of leveraging public and private funds and take months to years to work out. Kudos to all involved for the hard work on this one and I am very happy to see development occurring in our downtown at all - and esp[ecially in this space that will add immense value.
  • I disagree, but will admit I'm not an expert in the field. A typical parking spot downtown in a good garage is going to go for $1000 to $1,500 a year. Now, it's true that one car parking for an hour or two is more revenue for the garage than the two dollars a day the garage is getting from the monthly parkers. But monthly fees are stable and guaranteed.

    Take for example a garage downtown with 1,000 spots near, but not connected to any office building. If they sell all 1,000 spots to monthly parkers at $1,000, that's $1M in revenue for year.

    Now suppose they sell half of those and want to hold the other half for daily fee users. They've cut their guaranteed revenue in half (to $500K). Assuming they charge $4 for the first hour, and up to $12 for the day (which is typical for this market), in order to make up that $500K, they need over 41,000 full day daily fee users. That calculates to 115 full day users each day of the year (all 365).

    Like I said, I'm not an expert on the industry. But I don't think that there's any way that a garage several blocks from sports and entertainment venues (but close to the office buildings) is getting 115 full day fees every day of the year. I think the business model is to maximize monthly users, and hold over a very small percentage of the spots for daily fee and hourly users.

    I'll readily admit it if I'm wrong, but I just don't see the numbers of cars coming into the CBD for a single day as being that great.
  • Great news. I can't wait to see the renderings.

    During the current economy it is really surprising to hear of a project of this scope being announced. I hope it comes to fruition. There have been so many projects scrapped or put on hold as a result of the economic situation the past 2 years.

    Revenue from the garage I would anticipate to jump quite a bit with this development taking place. Not only will you have monthly parking for the downtown office workers and apartment dwellers, but there should also be an increase in usage due to the 37,000 sf of retail with this project. Add to that, whenever MSA gets developed and their could possible be even more demand for parking in that garage.

    I think this is a win win for everyone.
  • That garage is nowhere near full on a typical business day. It's an enormous garage (it has eight levels and talks up a half a city block, making it the rough equivalent of four MSA-sized lots) that has a large number of monthly parkers from the CCB and surrounding office buildings. My rough estimate is that the garage is 1/4 to 1/3 full on a typical day. That's not necessarily bad. It means that if the surrounding area develops and increases the parking demand, the garage can satisfy a significant increase in daily parking without causing much problem to monthly parkers.
  • Levi,
    I think it depends on location... I think you're right if a garage is farther from the core of downtown. And I think I'm right for garages in the core of downtown.

    And here's another point, in your example a single user is paying around $83 a month ($1 million a year divided by 12 months... then that divided by 1,000 spots)... $83 a month for one spot is about $4.15 a day (20 working days again). So, just to equal you're monthly user on a daily basis, a parking garage doesn't need someone using it for the full day, only a couple hours. Turn that spot over once and the garage is already making more on the 2 daily rate users versus the 1 monthly rate use. Granted that would mean filling all the remaining spots... but empty spots can be made up on the few users who would leave their car there for more than 3-4 hours and have to pay the full daily rate (the typical max out point for parking garages in the core downtown).

    Again, I think it does come down to location on which way the scenario (daily rate users vs. monthly rate users) works best.
  • The CCB has lots of folks parking there and at Conseco. All other arguments aside, it might make sense for them to own this garage rather than pay for monthly parking for their employees. Or at least pay themselves rather than someone else.
  • It's a start...finally!

    The mix of public-private? Sounds good on paper, but then I ain't no financial wizard. How often have those people been wrong?

    Glad to see the project is geared to affordable housing, and seems to be based on market reality. I hope this gives the area a jump start. While it has proximity to Lockerbie and Mass Ave., I'm not sure I'd want to be an urban pioneer in this spot. Right now it's one vast wasteland.

    Again, it's a start. A more vibrant City Market would make it a better draw, and would actually help fiill in the big depressing blank that used to be MSA.

    Enough already -- get started!
  • Well, I guess the ayes have it.

    Obviously the garage purchase is not a money-maker. If it were, someone in the private market would be willing to pay that price. Since that's obviously not the case, it's clearly an example of the City taking a gamble on future tax revenues making up the difference, AND (here's the key part for those of you, presumably not including most of you cheerleading for the financing arrangement, who actually care about what your property taxes are used for) that it wouldn't have happened on its own, without government subsidies in the next TEN years.

    BTW: Anybody notice that the event parking rate at Conseco garage just jumped from $8 to $12?
  • Ablerock,

    Common sense.
  • That's what I thought.

    Nada.
  • Able, if it was making money, don't you think the present owner would want to keep it, or that a private interest would be willing to buy it?
  • The market pays what things are worth. The city, on the other hand, can pay what they want, or at least the average of three appraisals. Why didn't they use eminent domain in this case? The Supreme Court established that they could.
  • Used to be parking lot for Chase Tower tenants... but the When was tore down. It'll be a money maker again, once their is a reason to park there... not basketball and not chase tower.
  • The private market is retarded, literally. They are way behind the curve on city development.
  • idyllic,

    There are several possible scenarios, of which lack of revenue is only one.

    Perhaps other properties in their portfolio need attention. Perhaps it's a fair deal and they're willing to let go of it to help the city. Perhaps they want to move into other areas of real estate. Perhaps they've received other offers and this was the best one. Perhaps the economy's bad and no one else is buying parking garages. Perhaps it's a crap property and the city just got ripped off.

    I'd like to think that DMD and co. crunched the numbers and are getting a good return on this investment. Some might disagree. There are people who are eternal pessimists about our local government's abilities, others who are more optimistic. Everyone's radar is a little more sensitive to money in this economy, so one would hope that Ballard and Co. wouldn't just throw that much money away.

    Anyway, if someone's got actual evidence that this deal is a money pit, let's hear it.

    If not, don't just make stuff up to support your opposition to downtown investment and development.

    Freelunch was using his speculative assertion to support his anti-city, anti-development diatribe. I was just calling that out. :-)

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