Real Estate & Retail

Circle Centre's 4th floor may drum up office tenant: Percussive Arts Society lease could spawn other deals

April 17, 2006

The Lawton, Okla.-based Percussive Arts Society might announce as early as next month that it's moving its 12 headquarters employees into 15,000 square feet on the troubled fourth floor of Circle Centre mall, according to a source familiar with the discussion.

Roughly 10,000 of those square feet would be a museum that might get bongo enthusiasts and the curious alike to stop by and check out some Thai button gongs and West African talking drums.

If all goes as planned, other not-forprofits might soon be marching to the organization's drumbeat.

"If [the Percussive Arts Society does] well, you'll probably see some similar users follow," said Steve Delaney, a partner at The Linder Co., a Carmel-based real estate firm.

That'd be a welcome relief for mall operators, who have been staring at a lot of empty space since most fourth floor tenants turned in their keys in mid-2004. The level could easily accommodate four tenants as large as the Percussive Society.

The organization, which has 8,000 members and represents drummers and percussionists, announced in late December that it would move to Indianapolis in early 2007.

Indianapolis-based Simon Property Group Inc., the mall's manager, would not comment on the discussions.

Neither would the arts organization, whose executive director, Michael Kenyon, would only say, "We hope to make an announcement soon."

Matt Carter, vice president of strategic development for the Indiana Convention and Visitors Bureau who is helping the organization find a new home, said, "We're in the final stages of negotiating the lease and we don't want to prejudice the deal until we get a deal done."

He added that ICVA hopes to find "space that will give them high profile and good access and an opportunity to become an actively engaged part of the community."

If the Percussive Society inks a deal, it'll be somewhat of a new direction for the mall's uppermost floor.

Most previous tenants were restaurants and bars such as World Mardi Gras, Flashbaxx, and Gator's.

But history has proven that the mall's ground floor space is most suited for restaurants. The only fourth-floor tenants today are a Gameworks Studio arcade, a nine-screen United Artists movie theater, a youth organization and a small Simon office. Four large spaces that formerly housed bars, a small storefront, and a Ben & Jerry's remain vacant.

"When the mall first opened up, some restaurants speculated that the restaurants in the mall would do better than the ones on the street," Delaney said. "But the ones on the street have tended to fare better."

In its last full year of operation in 2002, World Mardi Gras sold $2.5 million of food and beverage, according to public records. By comparison, in 2002 most of the restaurants on the mall's first-floor perimeter sold double that. Ruth's Chris had food and beverage sales of $5.5 million. Champps Americana rang up $5.3 million. P.F. Chang's had $4.4 million in sales.

The space hasn't been much more attractive for office clients. Efforts to lure the corporate headquarters of Galyan's Trading Co. Inc. to the fourth floor failed in 2002.

Delaney said that's why the idea of an arts organization leasing space on the fourth floor makes a lot of sense.

"Adaptive reuse is a good idea," he said.

He doubted retailers would start clamoring for fourth-floor space, regardless of how many people stop by the Percussive Society to play the bongos.

Simon would not disclose how much square footage remains empty on the fourth floor. According to a public document it released last year, 85 percent of the almost 800,000 square feet of leaseable space in the mall is occupied.

Sales on the fourth floor have always trailed the lower levels. In 2004, they were only $45.47 per square foot, thanks to the midyear exit of most tenants. During the same period, the other three levels averaged sales of $383 per square foot.

That's slightly above the national average. In 2004, sales per square foot for enclosed shopping malls was $376, according to the New York-based International Council of Shopping Centers.

The city of Indianapolis, which owns the land under the mall and paid $187 million of its $319 million price tag, did not return calls for comment. Neither did Indianapolisbased commercial real estate firm NAI Olympia Partners, which Simon has retained to find tenants for the fourth floor.

Beginning in 2009, the Percussive Arts Society will also host its annual convention in Indianapolis on a regular basis. The event is expected to have a $5.4 million annual economic impact.

It chose Indianapolis from a list of 96 suitors that included Nashville, Atlanta and Columbus, Ohio.
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