Commercial Real Estate and Retail Development and Development/Redevelopment and Real Estate & Retail

Condo owners in quandary over developer's offer

July 9, 2007

There never has been much turnover at Lakes at the Crossing, a quiet community of 77 condos tucked behind a strip center and an office park along East 86th Street at Keystone Avenue.

Many of the residents moved here to retire--taking advantage of community tennis courts, a pool and two winding lakes that give just about every home a view of the water. In the past, controversy was limited to the mundane questions like what color to paint the units (they stuck with brown), or how to rid the lakes of geese (they decided on fake, floating gators).

But these days, there's a bigger question among Lakes at the Crossing residents: Who will sell, and for how much?

A powerful local developer, Gershman Brown & Associates, is negotiating with each owner, trying to buy every condo, with an eye on redevelopment. Gershman Brown told Lakes at the Crossing residents about its plans at a neighborhood association meeting in mid-April. Principal Tom Crowley has been meeting individually with residents, working out contracts that would pay them at least twice the value of their homes, residents said.

But that's only if everyone agrees to sell. Gershman Brown will have to abandon the potentially $40 million deal if there are any holdouts, a fact that has put many neighbors on edge.

Real estate brokers said Gershman Brown is working with mall powerhouse Simon Property Group Inc. on the project. Indianapolis-based Simon already owns the retail strip Keystone Shoppes that sits just north of the condo property, as well as the booming Fashion Mall at Keystone across 86th Street.

Gershman Brown has worked with Simon before, partnering on Hamilton Town Center, the 900,000-square-foot retail development under construction in Noblesville. The company was founded by former Simon executives, including Crowley.

Officials with Simon and Gershman Brown did not return phone messages from IBJ.

Since residents of Lakes at the Crossing started meeting individually with Gershman Brown, things haven't been the same here. Everyone is working hard to stay up on the latest, meaning dogs are getting plenty of exercise. Many of the newer residents are amenable to a sale, while the longtimers are determined to stay.

"If I sell this place, I'm going to be rich," vowed 70-year-old Judith Pearson, as she walked her two dogs, a Pomeranian named PomPom and a Maltese-Poodle mix called Daisy.

Pearson has lived here since 1985 and says her price is $2 million. And that's after taxes, she adds.

If everyone at Lakes at the Crossing agrees to sell, the homes likely will be bulldozed for a mixed-use project with loads of retail space, along with offices and condos.

The 23-acre site is surrounded on three sides by an office park, a Kohl's and a Towne Place Suites hotel.

"You could really redefine that whole block," said Nick Wright, a broker in the local office of Cincinnati-based Midland Atlantic. "It could be a new gateway to the Keystone Crossing entrance. You could lease it over the weekend."

A line of trees separates the condos from the commercial corridor, where hundreds of retailers have taken just about every available space. Trouble is, many more retailers want to be in the area, driving demand for more development.

Across Keystone Avenue, local developer Premier Properties USA is working on another mixed-use project that would occupy more square footage than Castleton Square Mall (see May 28 IBJ). And along 86th Street, two new retail buildings are under construction on what used to be parking lots.

"It will be interesting, considering what Premier is doing, to see if both can succeed," said Sam Smith, CEO of locally based Resource Commercial Real Estate. "It's exciting."

But can the developers persuade all the condo owners to sell?

"I wouldn't bet against Gershman Brown and Simon," Smith said.

Nothing in the condominium association's bylaws forces anyone to sell, even if a majority opt to cash out, said Jeff Hawkins, a resident for two years who is the association treasurer.

That means one owner refusing to sell could scuttle the deal for everyone. Hawkins said most homes in the complex are worth around $280,000. If everyone gets twice that, the total price would exceed $43 million.

Mel McNairy, the association's vice president, has signed a contract to sell. He can't discuss the terms as part of the deal.

"I came here to retire," said McNairy, who has lived here two years. "But when an opportunity presents itself, it's an opportunity."

Mabel Young doesn't want to move. She came to Lakes at the Crossing right after it was built, by Phil Duke, founder of locally based Duke Realty Corp., in the mid-1980s. She lives in a three-bedroom, two-bath home on the dead end of Shoreway Court.

"I'm too old," said Young, 84. "I wanted to go out in a casket."

She's among the neighbors hoping for a return to the days when neighborhood association meetings were sparsely attended, and the issues were a little more routine.

Like the geese. Except they're no longer a problem; the gators scared away all but two.

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