Environment and Real Estate & Retail

Tower's leasing power should weather storm: Brokers say One Indiana Square will remain attractive

April 24, 2006

Several downtown leasing agents doubt the storm damage incurred at One Indiana Square will have a significant impact on the tower owners' ability to attract future office tenants.

In fact, a few contend their quick response to containing the fallout from displaced occupants could even make the building more attractive.

"There are a lot of people who never have this challenge put in front of them," said Jeff Harris, president of locally based Meridian Real Estate and a former marketing representative for the building. "Now they have a track record of unfortunately having this experience. I think that's a real plus."

The intense winds that swept through downtown April 2 damaged 16 of the skyscraper's 36 stories. City inspectors concluded the building's structure is fundamentally sound. But some surrounding streets were closed until April 19 due to falling debris from the tattered sections of the tower's curtain wall.

On the bright side, building repairs likely will be finished in weeks rather than the initial estimate of months, said Todd Maurer, president of Indianapolis-based Halakar Real Estate, leasing agent for the building. He and his father, Michael S. Maurer, co-own the tower with local businessman Robert Schloss and Pittsburghbased McKnight Group.

The group bought One Indiana Square in October 2001 for about $25 million. Built in 1970, it was for two decades Indiana's tallest skyscraper.

Michael Maurer is Indiana's secretary of commerce and a co-owner of IBJ Corp., along with Schloss.

Tenants on the undamaged floors might return in late April, Todd Maurer said, with the entire building possibly reopening in mid-May. Damage cost estimates remain unknown, he said.

The tower's mangled state has had little effect on companies scouting the building for space, said Maurer. He thinks local ownership is factoring into their continued interest.

"We've always sold this building to our clients as a locally owned building," he said. "This travesty has proven that we have followed through with what we've sold. It's hands-on ownership."

Since the purchase, One Indiana Square's occupancy rate has more than doubled, from 33 percent to above 70 percent. The owners spent millions to upgrade the building, including amenities such as a fitness center and bistro, which has helped create more interest in the tower, Maurer said.

He declined to divulge occupancy targets for the year. He said the partners just want to continue making good deals with good tenants.

Jeff Henry, managing partner of the local office of real estate firm Colliers Turley Martin Tucker, doubts the damage is enough to frighten prospects away. Colliers Turley served as the building's leasing and management company from its opening until 1985.

"I think people have short memories," Henry said. "People will want to know what caused it, but I don't think it will necessarily keep people who haven't been in the building from going in there."

Displaced tenants are working from other locations or are leasing temporary space in other downtown buildings. Chase Tower, for instance, accommodated a few Indiana Square occupants, said Bill Ehret, president of Summit Realty Group, which leases the tower on Monument Circle.

He struck a more neutral tone on the tower's future, saying it's too early to tell whether the damage will have a lasting impact.

"I do know that the leasing and ownership community has tried to reach out and work with the tenants in a cooperative environment, as opposed to any heavyhandedness in terms of rates and pricing," Ehret said.

Maurer said none of the building's 35 tenants, which include several law firms, has indicated they want to terminate their leases. Most could not legally cut ties anyway unless the tower closed for a long time, typically six to 12 months, leasing agents said.

Krieg DeVault LLP, which occupies floors 27 to 29, has resided in the building since it opened. While the law firm has several years left on its lease, Managing Partner Michael Williams said he is considering all options and will "have to see how all of this sorts out."

Williams, who-with most of the firm's lawyers-is working from the firm's Carmel office, lauded building managers for their efforts to keep tenants apprised. But obtaining necessary files has been difficult for tenants, who have had limited access to their belongings, he said.

"There's a lot of arm-chair quarterbacking going on," Williams said. "We've had our frustrations, but getting overly frustrated certainly doesn't help."

The tower's structure has endured its share of problems. Twice in the 1980s and once in the early 1990s, building owners renovated the tower's marble facade to ensure its stability.

And thunderstorms have blown out windows before. Winds shattered 29 windows in June 1978, causing extensive water damage. Two years later, high winds burst six windows.

About 10 years ago, water damage ruined the electrical system, dislodging tenants for about 10 days. Searching for some consolation, Williams said experience has served the firm well in becoming familiar with disaster-recovery methods.

The latest destruction is by far the most extensive. Northbrook, Ill.-based Wiss Janney Elstner Associates Inc., lead structural engineer, and Cincinnati-based Facade Forensics, lead engineer for the curtain wall, are overseeing renovations.

Sam Smith, president of Resource Commercial Real Estate and a veteran office broker in the Indianapolis area, said occupancy could get a boost if repairs are finished soon.

Smith praised One Indiana Square's ownership for its handling of the unforeseen events.

"They are not dragging their feet or moping around," Smith said. "They are hiring experts and getting after it to meet the challenge head on. That's all any landlord can do."
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