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

Ownership snarl resolved, Illinois Building on block

April 27, 2013
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Downtown’s historic Illinois Building could see new life as the longtime owner of the vacant structure prepares it for sale.

An affiliate of locally based HDG Mansur has owned the 10-story building at Illinois and Market streets since the 1980s. It’s sat empty for 10 years, thanks in large part to separate ownership of the building and the land—an arrangement once common among downtown buildings.

rop-illinois-042913-1col.jpg The Illinois Building has been vacant since 2003 but could be redeveloped if a buyer steps forward. (IBJ photo/ Perry Reichanadter)

But executives of HDG Mansur think the time is right to test the waters and are in the process of listing the building with a local real estate brokerage. They declined to say which one.

Any deal would bring the owners of the building and land underneath together in a conventional sale, said Bob Echols, HDG Mansur’s president and chief operating officer. The split ownership and a resulting years-long legal battle have prevented redevelopment of the property.

“No question, there’s a level of interest in the building,” Echols said. “We’re looking forward to getting it on the market and getting it sold.”

The 1926 building at the southeast corner of Illinois and Market streets last housed a food court and a gym, both of which closed in 2003. Three years later, it landed on the Indiana Landmarks “10 Most Endangered List.”

It features Italian marble, African mahogany woodwork and terrazzo tile floors, according to the Historic Indianapolis blog. It cost $800,000 to build, but would cost up to $100 million to replace.

Fencing now surrounds the deteriorating building to protect passersby from falling debris after a piece of marble fell from the structure earlier this year. HDG Mansur is performing “minimal” maintenance to keep the building in “good form,” Echols said.

HDG Mansur owns the nearby Market Tower. The company at times has considered redeveloping the Illinois Building itself but never seriously pursued any projects, Echols said.

City leaders would cheer a new use for the Illinois Building, both for saving it and for bringing new life to that part of downtown.

“It’s one of the biggest eyesores in downtown,” said Deron Kintner, deputy mayor for economic development. “It would be great if something would get done there.”

The buyers of a similar, long-vacant downtown building might also take a look at the Illinois Building.

Ambrose Property Group and The Whitsett Group plan to transform the brick and terra-cotta Consolidated Building at 115 N. Pennsylvania St. into 98 apartments with first-floor retail or restaurant space.

Ambrose might consider buying the Illinois Building, too, company President Aasif Bade said.

“It’s something we would take a look at,” he said. “Touring that building a couple of years ago, there’s definitely a lot of work to be done.”

The building is one of several on or near Monument Circle designed by Rubush and Hunter, one of the city’s top architectural firms in the early 20th century. Other prominent Rubush and Hunter buildings include the Columbia Club and the Circle Tower.

The Illinois Building has attracted at least one serious offer within the past few years. In 2009, local developer Newmark Knight Frank Halakar lined up to convert the building into a hotel.

Company principal Todd Maurer declined to divulge specifics, in terms of whether he had a commitment from a hotel brand. But he acknowledged that his firm agreed to pay $8 million before the deal fell apart prior to his signing a contract.

“It’s called the Great Recession,” said Maurer, citing the reason for the failure. “We had a deal in place to make it work and great pieces to make it work, and the recession killed it.”

How much interest the Illinois Building generates depends upon the asking price, which Maurer expects will be lower than the $8 million he offered. That’s because the Illinois Building’s condition continues to worsen, and building prices in general have yet to rebound from pre-recession levels.

“I don’t believe there would be a market for it at $8 million,” Maurer said. “There could be, but not for me.”

The Illinois Building is one of downtown’s few remaining vacant structures, but like the Consolidated Building, its lack of parking has made redevelopment tricky.

illinois-timeline.gifA January 2006 appraisal valued the building at $6.1 million, using a formula that steeply discounted the building by taking into account the unusual land ownership arrangement that made reuse difficult. An “undiscounted” appraisal valued the building and land at $11.6 million, according to court documents.

Building owner HDG Mansur leases the land from its two owners under a 99-year agreement it inherited when it bought the building. The pact, signed in 1919, stipulates that any improvements on the land revert to landowners when the lease expires in 2018.

The Halakar deal that fell apart would have brought together the multiple owners, freeing up the property for a free-and-clear sale. Any sale would need to follow a similar playbook: No one wants a building on land they won’t own in a matter of a few years.

“You would have to assume that’s the case,” Echols said. “It would be a conventional sale.”

One of the landowners, Lebanese businessman Salah Osseiran, attempted to work with HDG Mansur to break the ownership quagmire by filing a lawsuit in Marion Superior Court in 2006.

His Mayfair Investment Corp. owned two of the three parcels under the Illinois Building and 17 percent of the remaining parcel. He filed suit in an attempt to purchase the rest from heirs of John Holliday and his wife, Evaline. John Holliday founded the now-defunct Indianapolis News. The couple later donated land to the city at 64th and Meridian streets that became Holliday Park.

According to court records, Mayfair acquired its minority stake by persuading one heir to sell. But the roughly 20 remaining heirs with a stake turned down repeated offers.

A Marion Superior Court judge ruled against Mayfair in its attempt to force a sale of the remaining portion of the third parcel it did not own. Mayfair appealed in 2009 to the Indiana Court of Appeals, which affirmed the judge’s decision.

County property records list the two owners of the land as Holliday Properties LLC and Sana Corp. The company is operated by Osseiran, who also owns Mayfair.

Echols said he cannot discuss details of the land pact but thinks it shouldn’t prohibit the Illinois Building’s sale.

“People have called; people have been through the building,” he said. “It’s always had strong potential.”•

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