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Lender forecloses on two downtown office buildings

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Two major downtown office buildings located within a block of one another have been placed in receivership after their owner defaulted on a $28.5 million loan.

The two buildings, Market Square Center at 151 N. Delaware St., commonly known as the “Gold Building,” and Two Market Square at 251 E. Ohio St., are owned by Santa Monica, California-based Hertz Investment Group.

HSBC Bank USA National Association filed to foreclose on the properties July 25. Marion Superior Court Judge David J. Dreyer appointed the local office of Cassidy Turley as receiver Aug. 8.

Hertz received the $28.5 million loan in April 2006 to buy the buildings and an adjacent parking garage, according to the suit. The complaint doesn’t specify how much Hertz still owes on the mortgage or when it stopped making payments.

Both buildings are among the largest downtown based on square footage.

With about 420,500 square feet, the 20-story Gold Building ranks as the 10th largest. One of its biggest tenants is the Marion County Public Defender, which occupies 52,000 square feet. Constructed in 1975, the building is 73-percent occupied, according to IBJ statistics.

Two Market Square totals nearly 215,000 square feet, ranking it as downtown’s 16th-largest office complex. Its major tenants include the Marion County Prosecutor’s Office, which occupies 77,600 square feet, and First American Title. It was built in 1985 and is just 62-percent occupied, according to IBJ statistics.

But vacancies at both buildings could rise even more if the prosecutor and public defender leave when their leases expire within the next five years. The offices tentatively plan to move in 2018 to a proposed $500 million criminal justice center, which will combine 34 criminal courts and several county offices on part of the former General Motors stamping plant property on the western edge of downtown.

Hertz officials did not immediately respond to an IBJ request for comment  Wednesday morning.

Jon Owens, an office broker at Cassidy Turley, said two clients left the Gold Building last year.

“They weren’t reasonable and weren’t willing to meet the market,” he said of owner Hertz.

The losses of the prosecutor and public defender could deal yet another blow to downtown—already struggling to fill office space and hamstrung by a vacancy rate hovering above 20 percent. At least one other large building is in receivership as well.

Market Tower at 10 W. Market St. is set to be sold at a sheriff’s sale after an affiliate of embattled Indianapolis developer HDG Mansur defaulted on loans totaling $60 million.

HDG Mansur President Harold Garrison developed Market Tower at a cost of $92 million in the late 1980s with former business partner Lee Alig, who retains no ownership in the building.

Market Tower ranks as downtown’s sixth-largest office building, according to IBJ statistics, with roughly 517,500 square feet of rentable space. The tower was 91-percent occupied in 2011, the last time HDG Mansur disclosed its occupancy.

Hertz, meanwhile, owns another downtown office complex. It completed its purchase in April 2013 of the nearly 650,000-square-foot Capital Center and 525-space underground parking garage. The two-tower comlex at 201 and 205 N. Illinois St. is the fifth-largest downtown office center and is 77-percent leased.
 

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  • Wow Kevin!
    Kevin, that is one of the more reasonable comments I have seen on the IBJ in a long time. I agree, there is already good office space available. Negotiate the proper leases, and more than likely, will be a LOT cheaper than building new space, for just offices. If they need other types of space, do that, but not for offices. We don't need a lot of un occupied space downtown.
  • I challenge the Mayor
    I challenge our mayor & staff to work with the existing facilities & vacant office space - rather than building new buildings. The Judicial System is not broken, it just needs tweaked. What is broken is the 'residential home'. If parents (especially Dad's are visible at home) many problems will be resolved & the City will not need the new buildings. Let's focus on fixing the "families"! 'The future of tomorrow are the children of today.' If a new Judicial Center is built - it's guaranteed future generations will be paying for this forever. Come on - NO NEW BUILDINGS. I commented a couple weeks ago about the GM property & the City having blinders on. That property needs to be developed as desirable River front property, including a new Riverside Amusement Park - competing with Six Flags or kings Island. Tourists will flood downtown Indy. Hotels & restaurants will flourish. Look at the BIG picture.
    • Judicial Movement
      Ok here is my rant again. Yes yes yes the Judicial Center is outdated and an unsafe dinosaur ! Yes it needs to be replaced but with the minimum of disruption, so before Mayor Ballad get off on another of his wild schemes (look out Mayor Brainard he is after your title) let me say this again WHY move from the downtown area ? there is plenty of space in the near downtown area to use without disrupting any office space. We already have Jail II, the Processing Center and Liberty Hall within walking distance of the perfect location. The city spends so much time moving the homeless from the area they seem to forget to try to develop the area. Yes that is correct the area East of College, North of Georgia, West of Davidson and South of Maryland or even a little farther north if you need. The area is available and ready to rock ..... so tell me Mr. Mayor why not ? Yes we do need an new "complete" Judicial Campus in Indy but we need it central with room for growth .... unless those of you in charge stifle the growth of the city and we shrink instead of continue to grow.
    • Gold Bldg
      IBJ
    • Skeptical about CCB role
      I'm not sure I'm buying all the panic cries about criminal court relocation causing mass exodus and destroying downtown. Downtown office demand has been soft for years now, with many, many floors vacant in even the highest-profile buildings (OneAmerica, Chase, and especially Regions Towers). There must be some cultural aversion in Indy to working downtown, because there seems to be an inordinate amount of office space along US 31 and the NW side, while vacancies abound in the downtown core. The Gold Building is just dated and unattractive to tenants, particularly when there is so much desperation to fill the Class A buildings. The relocation of criminal courts will only tempt (a) bail bondsmen and (b) criminal lawyers to relocate. That makes up a very small percentage of downtown space. The largest legal tenants downtown have nothing to do with Marion County criminal system.
    • the next use
      These buildings won't be boarded up. Just like all the other available space downtown, Milhaus or Kite will buy it and construct more cheap, cookie cutter apartments or condos that will be the "hot" space for 2-3 years and then vacant.
    • lets board up the gold building
      Well HSBC Bank ought to be miffed, because 30 days ago Hertz bought the Bank of America tower in Jacksonville, FL for 88 million dollars, and has been crowing all over Jacksonville about its interest in more properties. So the writing is on the wall, n'est pas, that the new justice center will not only be built, but that it will siphon commercial tenants from existing office space, even if that means the default by some of Indy's largest buildings on their bank loans. These Hertz guys aren't even insolvent. They're loaded. They just don't want the occupancy rate they're going to get after the DA and PD bolt for Ballard's folly. How's that gonna help downtown mayor? Shall we board up the gold building?

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