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ICVA eyes funds from sale by CIB of downtown's Ober building

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Proceeds from the city’s planned sale of the Ober office building near Bankers Life Fieldhouse would be used to help sustain marketing and sales efforts by the Indianapolis Convention & Visitors Association, officials said Monday.

The Capital Improvement Board of Marion County, which owns the downtown office building as well as the Fieldhouse, said in July it would try to sell the six-story structure at the corner of Pennsylvania and Maryland streets.

At a CIB meeting Monday, the board disclosed for the first time what it hopes to do with any money the building generates.

CIB wants to plug a $2 million funding hole that will open up next year for the ICVA due to the expiration of a $5.9 million grant from Merrillville-based White Lodging Services Corp., which owns the new JW Marriott hotel in downtown Indianapolis.

That three-year grant had funded four additional sales representatives at ICVA as well as an annual summer advertising campaign the association runs in such outlying markets as northwest Indiana, Cincinnati and Louisville. The advertising campaign costs $1.2 million each year.

“If I don’t get the $2 million, then I lose that summer campaign and I lose those four sales people,” ICVA CEO Leonard Hoops said after the CIB meeting.

Hoops said ICVA, which is charged with marketing Indianapolis to convention groups and to meeting planners, estimates that the extra sales staff and summer campaign generate $212 million in annual visitor spending in Indianapolis. That spending, ICVA figures, generates $7 million per year in tax revenue for the CIB.

The proposal now being discussed by Hoops and Ann Lathrop, the president of the CIB, is for the ICVA to raise at least one dollar in private donations for every three dollars generated from the Ober building sale.

So, to reach his $2 million goal, Hoops said, ICVA would need to raise $500,000 and receive $1.5 million from the Ober building sale.

Hoops said he has started to have conversations with potential corporate donors, which could include Eli Lilly and Co., Dow AgroSciences LLC, PNC Bank and perhaps even White Lodging again.

The CIB has not publicized an asking price for the Ober building. The board paid $5.5 million for the building in 1999 because it wanted to control the properties around the new Indiana Fieldhouse basketball arena, which was later renamed Conseco Fieldhouse and is now called Bankers Life Fieldhouse.

In 2004, the Ober building was appraised for a value ranging between $4.4 million and $4.8 million.

The CIB more recently has paid for two more appraisals, but has not disclosed their results. On Monday, the CIB voted unanimously to have the Metropolitan Development Commission of Marion County attempt to sell the building on behalf of the CIB.

“I think this is a really good approach,” Lathrop said. “It’s not ‘our mission’ to market an office building.”

The 62,500-square-foot building is about half occupied, with such tenants as Ratio Architects and NuOrbit Media paying rent of roughly $14 to $15 per square foot.

The Ober building generated total operating revenue last year of $557,000 and produced a profit of nearly $316,000.

 
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  • indirect flow
    A key part of the flow of funds generated needs to be understood. When ICVA or other civic organizations generate visitation and spending, those funds don't come directly to that organization. Visitors don't pay to visit the ICVA. They are spent in private businesses, attractions and other destinations. The current situation is a case where one organization (white) gave money to ICVA which then generated tax revenue for CIB. That gift has been depleted. Understandably CIB wants to the tax revenue to continue. In order to do that, sales people have to be in place to secure additional meetings and conventions. Ad campaigns have to be implemented. In this case, that is ICVA's job which brings us back to where we started. ICVA's sales staff and ad campaign need to be funded.
  • Dump a Hard Asset for Soft Costs
    So why would you sell a building that generates $316,000 in profit annually (assumed to be cash profit) with 50% occupancy? You would sell it if you could redeploy the proceeds and make a higher return on capital then in the Ober building. I might lever the building up to $1.5 mill to give ICVA a year to support itself. If they don't then dump the 4 sales guys and the waste of money on soft costs/advertising. In the private sector ICVA would have been on notice to find the dough a year and a half ago or expect cuts! My guess is Ballard is going to sell it to a cronie and not at market value.
    • Sustainable Funding Has Never Been A Strong Suit of Indianapolis Government
      CorrND, it has long been Indianapolis public policy to skimp now and pay later. I agree that is is generally not a good idea to sell off an asset to fund normal operational expenses (like marketing), but that is the Indianapolis way. Rather than looking at raising revenues (i.e. increasing taxes, fees, rentals, etc) or cutting certain subsidies to developers and professional sports teams, the CIB like most Indianapolis government agencies would rather take an easy out that will be more costly in the long-run.
    • Funding
      Chris -- I think you missed my point. What I'm saying is that $2M spent funding staff and ads that generate $212M in spending and $7M in revenue back to CIB should be an easily justifiable expense. They shouldn't need a funding gimmick like selling off a building to justify continued spending on such activity. If you look at it in reverse: if they cut funding to that staff/ads, they would effectively be creating a ($5M) hole in their budget. That makes no sense.
      • The Staff Funding Needs to Be Replaced
        CorrND, assuming the figures the CIB gives are accurate, then what they are saying is that at the current level of funding $7 million in tax revenue is generated to be used on operations and the actual function of maintaining the buildings the CIB is charged with maintaining. The CIB is saying the revenue only comes in through increased tourist/conventioneer spending, and the tourists/conventioneers only come because of the $2 million a year spent on marketing to get them to come (the marketing is done by ICVA through money from the CIB). The funding for the marketing is currently is provided from a grant from White Loding Corp. The grant ends this year, so in order to keep the $2 million a year marketing campaign, the CIB needs to fund another source of money. If the marketing is reduce, presumably the tourists and conventions are substantially reduced, which means the CIB would not generate the $7 million a year in tax revenues.
      • confused
        Alright, I'm confused. The article says the CIB paid $5.5 million for the building in 1999, yet they are only hoping for $1.5 million if they sell the building today? I know the real estate market may have tanked, but something isn't adding up.
      • Staff Funding
        "....the extra sales staff and summer campaign generate $212 million in annual visitor spending in Indianapolis. That spending, ICVA figures, generates $7 million per year in tax revenue for the CIB." If the staff and the ad campaign alone generate $7M/yr, then why would CIB need additional funding to keep those things going?

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