Urban development and Retail Development and Development/Redevelopment and Real Estate & Retail

Pan Am buyer to raze rinks

July 30, 2007

A Texas firm has agreed to buy Pan Am Plaza's 12-story office building and skating rinks and is planning to replace the rinks with a more-than-$50-million restaurant and retail development.

The buyer, Houston-based Principle Equity Management, wants to build about 85,000 square feet of low-rise, restaurant-anchored retail space in time to capitalize on the opening of an expanded convention center in 2010. The group also is exploring more ambitious possibilities for redevelopment of the public plaza.

If the first phase of the project moves forward, it would seal the departure of the Indiana World Skating Academy, likely to a new facility at the Indiana State Fairgrounds.

Principle Equity plans to close on its purchase of the 139,000-square-foot office building next month. The current owner is California-based Coastal Partners LLC. The contract also gives Principle first rights to purchase the plaza and rinks from Indiana Sports Corp. It intends to exercise that option after closing on the office building.

The new owners plan to seek city incentives to spruce up the public part of Pan Am Plaza, which was developed for the 1987 Pan American Games. Water now leaks through to an underground parking garage, and bricks are crumbling. It's an eyesore the city would like to address before a $275 million Indiana Convention Center opens across the street in 2010, at the site of the RCA Dome.

The four-acre Pan Am parcel sits southeast of Georgia Street and Capitol Avenue, and is surrounded by the RCA Dome, Lucas Oil Stadium, Union Station and Circle Centre mall.

It's a prime property developers have eyed for years. Indianapolis-based Browning Investments Inc. pitched a 44-story InterContinental hotel for the property late in 2006, but the proposal lost out in a competition for city incentives to a plan by Merrillville-based White Lodging Services Corp. for a hotel complex near White River State Park.

After the city went another direction, developer Michael Browning opted against exercising an option to buy the plaza from the Sports Corp. He had received the option as a condition of a loan he made to the group after it lost millions of dollars on the 2002 World Basketball Championship.

For now, the new owners don't plan to build on the plaza itself, only the rinks. The company's director of acquisitions, Dan Summers, said he likes the site's potential for something tall but wants to take redevelopment a step at a time. With so many other hotel and condo projects in the works downtown, he wants to make sure the market supports whatever the company builds.

A more ambitious redevelopment plan also would require Principle Equity to either work with or buy out the owner of the 1,100-space parking garage under the plaza. The three-level garage is owned by New York-based Northeastern Security Development Corp.

Many blamed the failure of the InterContinental proposal on the developers' inability to work out a deal for the garage. The garage owner, Armand Lasky, said he's willing to play ball if the price is right. Lasky said he never got a serious offer from the InterContinental developers and is sick of tire-kickers. He also isn't happy that the Sports Corp., which sold him the garage in 1995, didn't offer him first rights to buy the plaza.

"Everyone I've dealt with on this deal is an embarrassment, from the Sports Corp. on down," Lasky said. "If Principle is a real player, they'll know how to negotiate with me."

None of the parties would disclose terms of the deal. The office building is 93-percent leased, and last appraised for tax purposes at $8.8 million.

The only tenant likely to be affected by the sale is the Indiana World Skating Academy, a not-for-profit whose mission is to train and develop skaters of all levels in the ice sports. The group recently agreed to a lease extension until April 2008, but it was first notified in October 2006 that it eventually would have to move to make way for redevelopment.

The Academy is working on plans for a facility with two new rinks at the Fairgrounds, which also could allow it to use the Coliseum and existing housing, said Executive Director Pam Robinson. The General Assembly has allocated $4 million, a big chunk of the estimated $10 million cost of a new facility.

Staying downtown may actually be prohibitively expensive for the Academy, even if the option were available. Its facility is in disrepair and the Academy would have to tear out both rinks and replace them by 2010, thanks to a new environmental regulation that bans the refrigerant now in use.

The Sports Corp. intends to remain in its space on the building's 12th floor, said John Dedman, a spokesman for the group. He confirmed that ISC is trying to sell the property, but he said no deal has been finalized.

"We're in the sports business, not the real estate business," Dedman said. "We just don't see the fulfillment of ISC's mission in owning this property."

Principle hopes city leaders are willing to help pay for the cost of maintenance and upgrades to the site. The company hired Rob Hunden, a former Indianapolis Public Improvement Bond Bank employee who worked on the downtown Marriott, among other projects, to make the pitch.

"There are a lot of potential options, but there are a lot of hurdles as well," said Hunden, who now runs his own consultancy, Hunden Strategic Partners, out of Chicago. "We've got to really understand what different parties are interested in doing on the site."

So far, they're leaning toward the conservative, thanks to a crowded market for hotels and condos downtown. In addition to White Lodging's 1,300-room hotel project, three other large hotel developments are on the drawing board. And two developers are vying to build residential, retail and offices on the Market Square Arena site.

"Maybe it's not the right time to throw another one into the mix," said Brian Epstein, president of Indianapolis-based Urban Space Commercial Properties.

Restaurants, though, are a pretty safe bet downtown, Epstein said. He has several restaurants that would look seriously at taking space at Pan Am Plaza.

"I've always loved that site," he said. "It's certainly perfect for restaurants and retail."

Summers said he has no renderings yet and still needs to talk with retail developers, but promised the project will be "architecturally appetizing." Principle envisions a village of shops and restaurants with outdoor dining, in a European style.

Principle is a privately held company with $250 million in assets, primarily office buildings. Summers said it's tried for years to break into the Indianapolis market. Pan Am is its first local acquisition. The developer believes it's an exciting one, thanks to the construction of Lucas Oil Stadium and plans for a convention center expansion.

"What's happening, this southern renaissance of the [Central Business District], that's what got us excited," Summers said. "The hope down the road is that something more intense could happen on that site."

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