In February, Goldsmith suspended construction while he and advisers analyzed options. Within months, he gave Circle Centre the green light, and construction resumed-but not because he was convinced the project would succeed.
"In the end, we decided job creation in the urban core and the psychological survival of the city were dependent on some development occurring downtown," recalled Goldsmith, now a professor at Harvard University. "We went forward with the mall with great anxiety."
Today, 10 years after the September 1995 opening of the downtown mall, business, government and community leaders agree that gamble paid off.
Financial statements filed with the city show that, except for the mostly vacant fourth floor, it's performing well. Last year, sales for nonanchor stores on the first three floors were $383 a square foot.
That's 5 percent higher than the average for U.S. malls, according to the investment firm Friedman Billings Ramsey & Co., but 10 percent below the average for the 172 malls managed by Simon Property Group Inc., the successor to Melvin Simon & Associates.
Still, the performance of the 791,000-square-foot mall has been good enough to yield a respectable return for Circle Centre Development Co., a partnership of 20 companies that helped save the project by investing $75 million into it in the early 1990s.
And more important, according to city and business leaders, the presence of the mall has fueled downtown's revival. Before it opened, downtown streets were mostly empty at night and on weekends. The success of the mall spurred an explosion of restaurant development on surrounding streets and also created momentum to develop White River State Park and expand the city's now-booming convention business.
Convention and city officials say no other city in the country has an urban shopping mall so tightly interwoven with convention hotels and a convention center. That's a big competitive advantage, they believe, since studies identify shopping as the No. 1 activity people pursue when they travel.
"It may be a little bit of a chicken-andegg question, as to whether it is the mall that helps with the convention business, or the convention business that helps with the mall," said Indianapolis Mayor Bart Peterson, a Democrat. "It is a clear-cut case of a synergistic relationship. They feed off each other."
Years of effort
Circle Centre's biggest cheerleader was William Hudnut, who served as Indianapolis mayor from 1976 to 1991. In his State of the City speech in 1980, he urged the private sector to "join hands" with government to launch a downtown shopping mall.
It would be years before the project went beyond blueprints. On a spring day in 1989, Hudnut pulled a lever that released the wrecking ball, signaling the official start of construction.
Almost immediately, the mall suffered a succession of setbacks.
Saks backed out. L.S. Ayres and Lazarus, downtown's only remaining department stores, said they weren't going to be part of the mall, either. And no one wanted to finance a mall with a single anchor.
Hudnut rallied the business community for help. In 1991, a dozen companies agreed to pump tens of millions of dollars into the project, then slated to cost more than $500 million.
Hudnut didn't seek re-election, and when he left office at year-end, he turned the project over to Goldsmith, who had a chilly relationship with his predecessor and had made skeptical comments about the project.
At that point, recalled Richard Wood, then the chairman of Eli Lilly and Co., "we were greatly concerned with the lack of any meaningful progress in pursuing the notion of the mall, especially since they went so far as to put the holes in the ground and stopped.
"That was a real tragedy, and it was complicated by the intramural political wars going on, especially on the Republican side between Hudnut and Goldsmith. There was no traction in trying to get off the mark and make something happen."
Goldsmith said that when he became mayor, Circle Centre "appeared to be a good idea with a large number of problems." For one, the mall extended to Monument Circle using property controlled by the Goodman family, which had not agreed to a sale. Worse, to settle an earlier lawsuit, the city had promised not to take Goodman's property through eminent domain.
Then there was the bleak economy, which frustrated efforts to find additional anchors or bank financing.
Saving the day was Parisian, one of the few U.S. department stores expanding at the time. It wanted to go into the Fashion Mall at Keystone at the Crossing. Simon and city officials persuaded the Alabama-based chain to come downtown as well.
Goldsmith then moved to fortify business backing. At a meeting at Lilly's corporate headquarters, "We told them that we weren't actually going to do a mall. We were going to do a downtown, and that their investment in the mall would be the piece that would make everything work."
Ultimately, 20 companies, led by Lilly's retirement plan, committed $75 million in equity capital. Big backers included American United Life Insurance Co. (now OneAmerica); The Associated Group (now WellPoint Inc); Bank One; and Conseco Inc.
Still, mall backers faced a remaining obstacle: arranging bank financing. As Indianapolis' biggest company, Lilly took on the task. It rounded up a team of its own employees who spent months mining overseas contacts.
Finally, in late 2002, a group of European lenders, led by Union Bank of Switzerland, committed $42.5 million. In return, the city had to boost its financial commitment by $30 million, to $187 million.
"The big question mark was the question of financing," Lilly's Wood recalled. "I think we were the only people in town with an interest and maybe the ability to get the financing arranged. That was our real contribution to the project."
The key pieces had fallen into place. The project, with a revised cost of $320 million, would shift south to avoid the Goodman property. And $12 million would come from the Lilly Endowment Inc. to cover the cost of the Artsgarden, a landmark public space suspended over the intersection of Washington and Illinois streets.
S t i l l , s ke p t i c i s m abounded.
"I still remember at dinner parties, people would come up and say, 'What in the world are you doing pushing that project? It will never float,'" recalled Wood. "You have to ignore that and take a hard financial look. It comes down to judgment at the end of the day."
Financial ins and outs
Today, none of the mall's financial partners regrets the leap of faith.
To fund its share of the project, the city of Indianapolis sold bonds and set up a tax-increment financing district, or TIF, spanning much of downtown. Under the arrangement, property taxes generated by new development in the district go toward debt repayment.
The TIF also has been used for other downtown projects, which has swelled the amount owed to more than $378 million. Even so, the TIF is performing well, throwing off sufficient cash to make annual payments, and it's projected to continue to do so until bonds are paid off in 2029, city officials say.
They say the TIF has worked because the mall has spurred additional development downtown and because low interest rates allowed the city to refinance debt under favorable terms.
The mall's solid performance allowed the city to recoup $20 million-the maximum possible-out of the extra $30 million it chipped in to save the project, said Evert Hauser, senior project manager with the Indianapolis Bond Bank.
And the city continues to receive revenue from Circle Centre's World Wonders parking garage-nearly $800,000 in 2004. It will apply World Wonders revenue toward incentives for the $93 million Conrad Hotel and condominium tower now under construction adjacent to the mall.
Corporate investors say they're satisfied, too. Under the terms of their financing agreements, they're entitled to an 8-percent annual return before other backers get a cut of profits.
While companies didn't get the full 8 percent every year, the investment performed well enough to enable them to help fund construction of Conseco Fieldhouse. In the late 1990s, most agreed to invest Circle City distributions into the $183 million project. In total, mall investors committed $37 million.
Good, bad calls
Building a shopping mall involves guesswork. Because few U.S. cities have successful downtown malls, that was even more true for Circle Centre.
Those involved in building the mall say one of their best decisions was to charge only a nominal amount for parking, originally just $1 for three hours, and to put bright lighting and high ceilings in the underground garages to make them as inviting as possible.
"The way the Simons looked at it, they had to compete with suburban malls that had free parking," said Hauser, who's been with the city since 1986 and worked on the mall.
Another key decision didn't prove so wise.
At the 11th hour, the city and Simon decided to add a fourth floor to make room for entertainment attractions. Simon officials-who declined to be interviewed for this article-were emboldened by the success of fourth-floor entertainment attractions at Mall of America near Minneapolis, mall planners say.
But unlike Circle Centre, Mall of America has parking garages that lead onto the fourth floor. Sales for venues on Circle Centre's fourth floor were disappointing almost from the start, and a collection of nightclubs known as World Mardi Gras closed two years ago.
Financial statements filed with the city show sales per square foot for the fourth floor fell from $130 in the first full year of operation to $45.47 last year. Simon now is marketing vacant portions of the fourth floor for office space.
"Everyone was telling me I should do it," Goldsmith recalled. "Even at the last second, I had reservations. I decided the wrong way."
Goldsmith said he was hedging his bets in going along with a fourth floor. He hoped the mall would spur development of restaurants, nightclubs and other attractions on surrounding streets. But if it didn't, at least they'd be in the mall.
"We really wanted street activity, but we weren't at all sure there would be street activity," he said.
The fourth-floor attractions did give the mall a boost in its early years, before restaurants proliferated on surrounding streets, said Herman Renfro, who was the lead Simon developer for Circle Centre and now owns his own company.
Renfro said the makeup of Circle Centre's customer base also has been a surprise. Mall planners expected 25 percent to 30 percent of visitors would be convention-related. In fact, the percentage is about 50.
"You project what the mix will be," he said. "You are not always right. But if the total comes out right, that's fine."
Mall supporters say more locals will shop at Circle Centre as the number of people living downtown swells. According to Indianapolis Downtown Inc., developers are planning or have recently completed $350 million in projects that will add 1,245 homes, apartments and condos downtown.
One of those projects is the high-end Conrad, which will connect to the mall via the Artsgarden. The 23-story tower, slated to open next spring, will include six floors of condos as well as 243 hotel rooms.
City officials say Circle Centre also will receive a lift when the trendy clothing retailer Hennes & Mauritz opens a 20,000-square-foot store in the mall this fall. Better known as H&M, Hennes & Mauritz is to clothing what IKEA is to furniture: hip, Swedish and budgetfriendly.
"The addition very shortly of H&M is going to be a major difference-maker for that mall," said Gordon Hendry, the city's director of economic development. "That is an extremely popular store nationwide, and it will be the only one in Indianapolis."
Overall, however, Circle Centre today has fewer stores that aren't also in the suburbs than it did a decade ago. Unique retailers closing Circle Centre stores in recent years include FAO Schwartz, the Warner Bros. Studio Store and The Museum Co. All of those stemmed from parent companies' financial problems.
At the same time, shopping center development has continued to proliferate in the suburbs, and existing malls have upgraded their offerings, stiffening competition.
In addition, Goldsmith observed, residential development continues to extend farther and farther beyond Marion County, heightening the challenge of attracting residents downtown.
"I would caution city officials not to take anything for granted," he said. "Freshness is needed to continue getting people downtown. I think it is a successful mall with great community and city leadership. But it would be a mistake to assume it would sustain itself with its own momentum."