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City eyes Cummins as anchor for key downtown site

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City officials are quietly trying to orchestrate what would be a major coup: Landing Cummins as an office anchor for a second phase of redevelopment on the former home of Market Square Arena.

No one directly involved in the discussions would discuss the plans. But real estate brokers familiar with the strategy say Cummins would take about 100,000 square feet of space in a mixed-use project that could include a Target store and residential space—tripling Cummins’ downtown footprint.

The deal would come with incentives worth potentially millions of dollars to entice the Columbus-based manufacturer of diesel engines to build downtown.

cummins-table.gifDeron Kintner, deputy mayor of economic development, declined to comment on whether the city is pursuing Cummins or where negotiations stand. And Cummins spokesman Jon Mills said the company remains “committed to our Columbus headquarters” as it evaluates options to consolidate two downtown Indianapolis offices.

That the city is remaining tight-lipped on negotiations illustrates the fragile nature of the talks, surmised Bill Ehret, president and CEO of Indianapolis-based Summit Realty Group, which is not involved in the negotiations.

The southern half of the city-owned site is looking more promising for Cummins now that the city selected Flaherty & Collins Properties to develop the northern half, brokers said. City officials have said the southern property should generate more interest once plans to the north are finalized.

If Cummins builds on the vacant parcel—bounded by East Market Street, North New Jersey Street, North Alabama Street and a parking lot along Washington Street—it likely would be as part of another mixed-use project.

First-floor retail and possibly apartments above office space would make the most sense, brokers said. The city has made no secret of its desire to lure a large retailer such as Target downtown, and the parcel may represent its best hope.

But not everyone supports the idea of giving incentives for construction of new downtown office space—not when so much space is sitting vacant.

Downtown had more than 2.1 million square feet of vacant office space in the second quarter, about 20 percent of the total available, data from Cassidy Turley shows. The vacancy rate for Class A space was even higher, at 21-percent vacancy rate.

“In my opinion, there is sufficient Class A office space in downtown Indianapolis to accommodate many large users,” said Todd Maurer, a principal in broker/developer Newmark Knight Frank Halakar, a partial owner of One Indiana Square. “I don’t see the logic of the city providing incentives when there’s already plenty of office space.”

Others are skeptical about downtown’s ability to support another large retailer.

“Let’s face it, as we saw with what happened at Circle Centre with Nordstrom’s leaving and that space, that’s basically being repurposed as office space,” Aasif Bade, president of Ambrose Property Group, said at IBJ’s Sept. 13 Commercial Real Estate & Construction Power Breakfast. “So I think that tells you the demand for retail space at least in terms of a Target or a Meijer or a big, huge department store like that going on that site, I think is a ways off.”

Bade was referring to negotiations between mall operator Simon Property Group Inc. and The Indianapolis Star, which plans to occupy some of the former Nordstrom space after it vacates its building at 307 N. Pennsylvania St. to make way for a redevelopment project.

Ersal Ozdemir, president and CEO of Keystone Group, one of five bidders losing out to Flaherty & Collins, would like to see the Cummins deal get done.

“The city owns the land, so that would be the most economically feasible [for Cummins],” he said, “It’s a huge gain for the city. I think we need to have them somewhere.”

cummins-map.gifBoth pieces of the Market Square Arena site are owned by the city and have been parking lots since the venue was demolished in 2001.

Two month ago, city officials announced a 28-story, $81 million project from local developer Flaherty & Collins featuring 43,000 square feet of retail space that could help lure a specialty grocer downtown.

The city has agreed to contribute $17.8 million by investing property taxes generated from the project back into the development, which would break ground next spring and be completed by late 2015.

IBJ reported in June that Cummins is looking to expand its Indianapolis presence by building a bigger office that could be as large as 100,000 square feet to accommodate future growth.

Cummins leases roughly 30,000 square feet between OneAmerica Tower and Capital Center North for several corporate departments. The company wants to consolidate the offices before its leases expire within the next two years by constructing its own building that boasts some architectural significance.

Brokers had said the former Market Square Arena site was one of at least four locations Cummins was scouting. Also said to be in the mix were Buckingham’s CityWay development at Delaware and South streets, along with land at the southwest corner of Maryland and Pennsylvania streets, and at the northeast corner of Capitol Avenue and Michigan Street.

A larger Cummins presence would be a boon for Indianapolis. The company ranks 150th on the most recent Fortune 500 list. Cummins is the state’s third-largest public company, in terms of last year’s revenue of $17.3 billion, trailing only WellPoint Inc. and Eli Lilly and Co.

“If we could be so fortunate to get Cummins [to build a larger office], that would be awesome,” said Summit Realty’s Ehret.

Cummins established its Indianapolis office in 2004. The two locations at OneAmerica Tower and Capital City North house executive offices, as well as corporate departments such as human resources, legal, information technology and investor relations.•

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  • Great for Downtown
    I think this could be a fantastic project for downtown if done properly. First floor retail with high end office and high density residential above would really help anchor the east side. I know some people are questioning if more retail is needed but I don't believe there is a better site downtown for a Target then this city block. American Dirt listed several other locations but if you do your research you will find those locations don't have enough square footage or the configuration to support Target. Artistry is closest in sq ft but still a bit small at 68,000 sf and the concrete columns from the former Ops center wouldn't be a design condusive to a Target. The 28 story F&C tower on the north side of this project is only slated for 43,000 sq ft of retail and F&C has already stated they are looking for a specialty grocer for this site. I am tired of hearing about why doesn't Target go into the Nordstrom site, again this is not configured well for Target. This south MSA site is much better allowing building new construction. Nordstrom going out of CC has more to do with the struggles of the department store business than with CC. Carson's is still doing well and Simon continues to land new small stores inside the mall. Keep building on the residential and the retail will continue to follow. Cummins would help the south MSA site by allowing additional office to be built with them as the anchor. Yes we do have plentiful available office space already downtown but think about the last time new construction was built. There is a need for a small amount of reasonable new space. Target would build in this location due to the residential more then Cummins but having Cummins anchoring an office component would make this project even stronger. I hope the city is able to pull this deal together. It would really anchor the east side of downtown and drive even more demand for residential which would in turn then drive demand for even more retail.
  • Far From a Dying City
    The comment about a dying city is a joke. This is a city that is on the rise. Just a casual glance across the city's landscape shows this. Having Cummins show a substantial presence with a skyrise would be ideal. For those complaining about the existing space, this will help with those. Creating new infrasture to further solidify the downtown as a place of residence and to work will lead to other business moving downtown to help service those workers/residents. Developments like those at Market and elsewhere are exactly what the city needs to show the rest of the country and state that this is a city that offers everything you need with low cost of living. Look at Mass Ave and Fountain Square. Growth like that does not happen in a city that is dying. This is coming from someone who thought he would eventually move to another city when I got here after graduating from IU. If you have a problem with the city, then get involved and do something about it to make it into what you want.
  • Cutthroat Cummins
    Indiana bankruptcy courts have more than one former Cummins "partner" that created off-balance sheet financing for Cummins. When opportunities to buy inventory from foreign sources directly came available, Cummins cancelled agreements leaving logistics providers like Constinental Sales and Engineering bankrupt. Watch your back Indianapolis.
  • Other retail
    "The city has made no secret of its desire to lure a large retailer such as Target downtown, and the parcel may represent its best hope." What about Artistry, or the 28-story development going up across the street? What about the F&C project going up along Mass Avenue, or the additional storefront space at the current site of the Fire Station/credit union? Or the second phase of the F&C project going up around Senate/Michigan? For that matter, what about Nordstrom? Surely something (anything?) is better and has more long-term viability than locating the Indy Star's ever-shrinking operations at the Nordstrom site. If the City is considering tax incentives for Cummins with a long-term goal of luring Target, when we already have so much unabsorbed retail in existence downtown or in construction, we're shooting ourselves in the foot before we've even opened the gate.
  • reddog
    Cummins' CEO lives in Indy. He alone contributes very significantly in property and income taxes to Marion County...close to $100,000 worth. Just imagine if a bunch more highly paid executives lived and worked here.
  • Cummins
    Cummins has one of the most aggressive property management departments in the country. They will end up with a no cost office building with the taxpayers of Marion County footing the entire bill. Mark these words.
    • Rodney
      Your comment is the epitome of ignorance, no offense. Show me a single quote from anyone connected to the city in any official capacity as it relates to leasing the Nordstrom space before the Super Bowl. Besides, what on Earth does that have to do with this article and your contention that Indianapolis is a dying city? Indianapolis is changing, yes, but it is far from dying. And our downtown is still a model for others to immitate.
    • was ofilegin
      I remember the city saying that the Nordstrom store at Circle Center would be leased BEFORE the Super Bowl. That was a long time ago. I don't believe anything these clowns float out there in an effort to boost their oh-so-precious image. Indianapolis is a dying city. It's not as bad as Detroit, but given time we'll get there all the same. Time to move on. Nothing ever changes with this crowd.

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