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Downtown apartment developers take divergent paths to financing

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It took J.C. Hart Co. more than a year to secure a $5 million bank loan to expand its downtown apartment community, The Waverley, despite an occupancy rate above 90 percent and a prime location a few blocks from corporate giants Eli Lilly and Co. and WellPoint Inc.

Fellow apartment developer Buckingham Cos. took a different approach in lining up financing for its project in the neighborhood: It teamed with Lilly to persuade Mayor Greg Ballard to offer the city’s priciest package of taxpayer support for a private development project since Circle Centre mall.

The city in October offered to provide an $86 million loan and build $9 million in infrastructure to get the $150 million North of South project off the ground. Plans call for a boutique hotel, retail space, a YMCA branch, and 320 upscale apartments that would go head-to-head with the privately financed J.C. Hart development.

Carmel-based Hart—which finalized its financing deal with Warsaw-based Lake City Bank and State Bank of Lizton the same month the mayor announced the Buckingham deal—plans to add 48 one-bedroom apartments to its 164-unit project at 151 S. East St. The first phase of Waverley, launched in 2007, cost about $18 million.
 

hart-file-photo15col J.C. Hart Co. plans to start construction soon on a 48-unit expansion of The Waverly. (IBJ File Photo)

North of South, which still requires City-County Council approval, would be built a few blocks away on a Lilly-owned parking lot between Delaware Street, South Street and Virginia Avenue.

The larger project should stimulate interest in other nearby developments, helping make that portion of downtown a more popular place to live, said John C. Hart Jr., president of J.C. Hart Co.

He applauded Buckingham’s creativity in landing the support of Lilly and the city and structuring a “financing vehicle” so the project could move forward quickly. But he’d also like to know more about the economics that justify so much taxpayer support where private lenders balked.

“It’s frustrating to the extent it’s taken us months and months to get our project lending commitment, frustrating to know the city was willing to offer something that might free up capital and make it easier to start a project,” Hart said.

“As a developer who has built a project downtown without any assistance and another 48 units without any government assistance, it would be a bit frustrating to be competing with a project that is getting government assistance.”

The city rarely offers incentive packages for multifamily developments. A recent exception was the Cosmopolitan on the Canal project by Flaherty & Collins Properties. The developers in that case won tax abatements in 2007 worth $2.7 million in exchange for providing public parking and rest rooms along the canal and street-level retail space.

North of South will go far beyond a standard multifamily development, providing an amenity with intangible benefits private lenders simply don’t consider, said Deron Kintner, executive director of the Indianapolis Public Improvement Bond Bank.

Intangible No. 1: providing an amenity that might stem job cuts by Lilly, the city’s largest employer, which is vacating its 465,000-square-foot Faris Campus and moving workers to the Lilly Corporate Center.

Kintner said the city will not take an equity interest in North of South and will not charge the developer a spread above the municipal borrowing rate, both moves designed to increase the likelihood the project is successful. For at least 10 years, all property taxes on the development would go toward paying down the project debt.

“If Lilly had come to us and told us The Waverley was important to their future, we would have listened just the same,” Kintner said. “This is a unique project to the city. It’s not just another multifamily project or a hotel. I don’t want people to think this type of funding will be the norm now. Every project is unique in its own way.”

Hart understands some projects will need government help, particularly for infrastructure needs such as parking. He also can relate to hoteliers’ bristling at the city’s support for North of South’s new boutique hotel, wondering whether another hotel will spread the market’s existing room-nights too thin.

But if Hart had to do it over again, he still would invest in The Waverley.

“We believe very strongly in our location and that side of town and aren’t surprised others would be interested in adding to the inventory,” Hart said. “Activity has a way of breeding other activity. We welcome the competition, and we look forward to building our addition.”•

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  • thanks
    Our city is very fortunate to have such strong support from Lilly and from people like John Hart

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  1. If I were a developer I would be looking at the Fountain Square and Fletcher Place neighborhoods instead of Broad Ripple. I would avoid the dysfunctional BRVA with all of their headaches. It's like deciding between a Blackberry or an iPhone 5s smartphone. BR is greatly in need of updates. It has become stale and outdated. Whereas Fountain Square, Fletcher Place and Mass Ave have become the "new" Broad Ripples. Every time I see people on the strip in BR on the weekend I want to ask them, "How is it you are not familiar with Fountain Square or Mass Ave? You have choices and you choose BR?" Long vacant storefronts like the old Scholar's Inn Bake House and ZA, both on prominent corners, hurt the village's image. Many business on the strip could use updated facades. Cigarette butt covered sidewalks and graffiti covered walls don't help either. The whole strip just looks like it needs to be power washed. I know there is more to the BRV than the 700-1100 blocks of Broad Ripple Ave, but that is what people see when they think of BR. It will always be a nice place live, but is quickly becoming a not-so-nice place to visit.

  2. I sure hope so and would gladly join a law suit against them. They flat out rob people and their little punk scam artist telephone losers actually enjoy it. I would love to run into one of them some day!!

  3. Biggest scam ever!! Took 307 out of my bank ac count. Never received a single call! They prey on new small business and flat out rob them! Do not sign up with these thieves. I filed a complaint with the ftc. I suggest doing the same ic they robbed you too.

  4. Woohoo! We're #200!!! Absolutely disgusting. Bring on the congestion. Indianapolis NEEDS it.

  5. So Westfield invested about $30M in developing Grand Park and attendance to date is good enough that local hotel can't meet the demand. Carmel invested $180M in the Palladium - which generates zero hotel demand for its casino acts. Which Mayor made the better decision?

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