Economic Development and Real Estate & Retail

Bye-bye blight?: Developers grabbing parcels east of Circle Centre mall

October 10, 2005

Several groups are floating plans and crunching numbers for downtown hotel or condo projects east of Circle Centre mall, an area that has been largely passed over for new developments in recent years.

One of the more imminent projects is a large mixed-use development for the quarter-block at Maryland and Pennsylvania streets, now occupied by surface parking lots and a 9,000-squarefoot office building.

A group that includes local developer J. Greg Allen has four separate parcels at the corner under contract from the owners, who have jointly marketed their properties for several years.

The purchase of some of those parcels, including the Omega Communications building at 29 E. Maryland St., are expected to close in the coming weeks.

Brokers declined to say exactly who has the corner under contract, but other sources identified Allen, a residential and commercial developer known mostly for projects on the south side of Indianapolis and in Greenwood. Gary Perel of locally based Urban Space Commercial Properties represents three of the property owners on the corner, and Todd Maurer of locally based Halakar Real Estate represents the owner of the Omega building.

Allen did not return calls seeking comment, but Perel said the buyer has plans for a mixed-use project that could include hotel, condominium and/or retail aspects.

Others said plans call for a high-rise tower on the site, perhaps as tall as 30 stories.

That's not surprising given the price of downtown land, Perel said.

"That makes sense if you take into account the sales price for the parcel," he said. "You would have to go vertical to make any money."

Perel declined to divulge the contract price of the four parcels, which total about one acre.

Others said land near the heart of downtown could fetch from $2 million to $4 million per acre.

Owners of the quarter-block under contract include a local partnership affiliated with the nearby Hampton Inn, which uses the lot for hotel parking; the Bloomington-based owners of the nearby Harness Factory Lofts; a local parking lot operator; and Bob Schloss, whose Omega Communications makes its headquarters in the lone building on the site.

Schloss is a shareholder in IBJ Corp., which owns Indianapolis Business Journal.

Several parties have looked at the corner in recent years, but none have succeeded in purchasing it. Locally based Simon Property Group Inc. twice considered the site for a new headquarters building, once in 1998 and again last year before the company landed a site across from the Statehouse on Capitol Commons.

If the purchase of that quarter-block closes, Allen could become the first of several developers to make a go of redeveloping property in that area.

Groups are said to be eyeing several nearby corners with plans to develop condos, hotels or a combination of both.

One local partnership until early October had five buildings at the northwest corner of Washington and Pennsylvania streets under contract from the individual owners. The group planned to demolish the hodge-podge of low-rise retail/office buildings, most of them in various states of disrepair, on the site.

Plans called for a high-rise condo tower on the site before developers abandoned the project because of competition from other downtown condo projects and the developer's plans elsewhere, said Bob Peterson, one of the partners.

"We decided to kind of let that [site] go at this point," Peterson said. "It's still a good site in a great location."

Peterson and his partners recently purchased the 85-acre Britton Golf Course on State Road 37 between Fishers and Noblesville with plans for a retail development. They also develop water parks in other states under the Wild River Development name.

The condo project was unlikely to receive the same level of city incentives as other downtown projects, including the Conrad Hotel and Residences at Washington and Illinois streets, Peterson said, and that would've made the project difficult to finance. He declined to divulge the contract price of the five buildings.

In late September, Ted Antonopoulas, who represents the owner of 36 E. Washington St., said that three-story building was under contract for $550,000.

Hotel boom

Other sites in the area are being or have recently been considered for hotels, several real estate observers said. Those include the Zipper Building at Washington Street and Virginia Avenue and the long-vacant Consolidated Building on Pennsylvania between Market and Ohio streets.

Developers are beginning to look forward to the coming expansion of the Indiana Convention Center. Even though that's not slated to be finished until 2010, site acquisition, financing and construction could eat up much of that time, said Mark Eble, a locally based hotel consultant with Atlanta-based PKF Consulting.

In recent years, major hotel companies such as Hilton Hotels and Marriott International have introduced new brands to the downtown market, but Eble said a growing number of developers are considering projects not tied to a national franchise brand.

"That's no longer the kiss of death," Eble said of non-national-branded hotels, noting consumers have accepted such hotels in other cities. "The biggest headache is financing. It's very hard to get a loan on a hotel that is not branded."

He predicted more developers would consider hotels downtown as marketing for One Market Square heats up, creating more competition among developers for condo buyers. That project, on the site of the former Market Square Arena, will offer 208 condos in a 31-story tower in its first phase.

Condos on Washington?

On the north side of Washington Street east of Meridian, a partnership led by Summit Realty Group principals Bill Ehret and John Demaree are still working on plans for four parcels of real estate they own between the King Cole building and the Victoria Centre.

"We're working on putting together something a little bigger," Demaree said, declining to elaborate. "We're just not there yet."

Designs for condo buildings at that end of the block have been floating around for at least six years, but none have ever come to fruition. Last fall, locally based Britton Building and Design purchased the McOuat building at 14 E. Washington St. and said it would convert it to condos. But three months later the 7-story building was sold to Ehret and Demaree's partnership.

"We felt that with the Conrad [residences] going in, there were only so many millionaires in this town," said Britton principal Patrick Heitz.

Britton purchased the building from local attorney Steven Tuchman for $830,000 and sold it to TOP Property Investors LLC, led by Ehret and Demaree, for $1.03 million, according to Center Township Assessor's records.

Less than a month later, a different partnership including Ehret and Demaree, Uptown Realty Investors LLC, paid $900,000 for a small building at 10 E. Washington St., formerly home to H&H Mart.

Parking shortage an obstacle

A lack of available parking is one of the oft-cited factors hindering redevelopment of the north side of the block. None of the buildings on the north side includes parking, an essential component particularly for residential redevelopment, Evans and others said.

The parking situation could ease soon, however, with a five-level garage planned at 120 E. Washington St., between the 110 East Washington condo building and the Disciples of Christ office building.

That garage is being built by a partnership that includes local firms Sideline Parking and Hagerman Construction, said Sideline principal Shawn W. Cannon. The 300-space garage will include a lower level reserved for residents of the condo building next door and four levels of above-ground parking.

Along with parking, high asking prices for dilapidated buildings on the block also have been obstacles to redevelopment.

For years, the city has tried to push development on the north side of the block between Meridian and Washington streets. Former Mayor Steve Goldsmith in the late 1990s investigated pursuing acquisition of many of the buildings through eminent domain, but dropped that plan when property owners balked.

Mayor Bart Peterson's administration also has tried to promote development on the block, but "the challenges are always going to be parking and how does that work," said Gordon Hendry, Peterson's director of economic development.

Several development teams have approached the city over the years with plans for redeveloping the north side of that block, but Hendry said he believes the time may be coming soon for one or more projects to stick.

"It's really a question of timing, and are people ready to make the investment to improve that block. We think the market conditions are pretty good now," he said, citing the coming convention center expansion and new stadium as drivers for retail and mixed-use projects.

"When the time is right, the city will definitely be working on these projects," he said. "Whatever we can do to promote the success of these projects, we'll do."
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