Open thread: What's happening?

August 9, 2007
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Eyes and EarsYour Friday gift: An open thread to discuss whatever real estate topics are on your minds. Fashion Mall? MSA? Penn Centre? The new BMW ad on this blog? We're classin' it up! Or, weigh in on these stories from the $1.75 edition: Tax assessments dropped substantially this year for downtown skyscrapers. And it isn't easy being green for local businesses, including real estate firms. I'll be out Friday. Let me know if you spot anything this weekend.
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  • Erich R. H. (indiexinxindy)August 9, 2007 5:50 PM
    Hmmm. With all these pretty damn decent proposals on the table..... when the hell are we gonna see any cranes? It seems as tho they're all being used on The Luke. And yea... When is the verdict on the Canal Hotel? I just pray to God that the European one wins!
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  • thundermuttAugust 9, 2007 6:23 PM
    Don't look for many cranes soon. There's a credit crunch in national/international markets, and getting more than one of these tower deals financed would be a miracle in that kind of lending environment.

    And does anyone think Mayor Bart has anything left for giveaways in an election year when his voter base is outraged by property tax increases?
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  • AbandonedAugust 9, 2007 6:53 PM
    My life is so empty without a defined Property Lines topic to talk about.
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  • Erich R. H. (indiexinxindy)August 9, 2007 7:27 PM
    Also, i'd love to give a bit shout out to the Venu proposal... I think it's freaking awesome that all of the parking spaces will be UNDERground! Hopefully, this sets a precedent for futrue projects in Indy! That would be quite lovely...
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  • DanielAugust 9, 2007 7:44 PM
    to bad they cant put all the parking spaces underground at fashion mall
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  • trekAugust 9, 2007 10:22 PM
    The Glendale renovation is such a dissapointment. We deserve better in Broad Ripple!
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  • JAKAugust 10, 2007 7:28 AM
    Erich, I think that the European Canal Hotel proposal looks ridiculous. It would completely disregard the context of the canal area and would look like a novelty. I am sure that design will not stand the test of time. Plus, the developers are more accustomed to suburban style hotels than innovative urban structures. I know that most of the readers of this blog would be reticent about more of that kind of development.
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  • ryanAugust 10, 2007 7:33 AM
    but jak, have you seen the other proposal? looks more like one of the bland coporate life-sciences buildings in the north end of the canal than anything interesting...i definitely vote for lodgeworks' euro-style plan! either way, glad to see something happening there...
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  • CDC GuyAugust 10, 2007 8:28 AM
    What does everyone think about the new Design Guidelines proposed for downtown? Huge download is available at http://www.indyrc2020.org/

    Do we need architectural review downtown? Should city staff be the ones doing it?
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  • Helen(unionstation13)August 10, 2007 8:45 AM
    I wonder how many of these projects will actually be built.
    I hope most(if not all) are built, as these could change the feel of downtown totally. Filling up one parking lot on a street can change the feel of the street forever, or facading over nasty uglyness.
    One thing I wish they would do, is put more ornate street lighting up within the square mile.
    The penn centre, I cant wait for it, its refreshing style of architecture will really get people to be more creative.
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  • BradshawAugust 10, 2007 8:55 AM
    I know it's a chain restaurant, but has anyone heard about any new Hooters restaurants opening? I'm in the mood for chicken wings...
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  • mobyheadAugust 10, 2007 8:58 AM
    There is a CRANE over at the new condo being built on Mass Ave., 3Mass.
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  • ragerunnerAugust 10, 2007 9:00 AM
    I agree with thundermutt,
    If the world credit crisis doesn't calm down in a big way many projects here in Indy and other places will find it very difficult to get of the ground. Its great to see all these projects but the financial end of the market is not looking so good at the moment.
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  • JayAugust 10, 2007 9:22 AM
    As a relatively newbie to Indy and an Urban lover, I'm shocked by the huge amount of surface parking spaces around this city. Particularly north of the capital! It is amazing that that is in a real big-city downtown. Who owns all of those lots...is it the state?
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  • CorrNDAugust 10, 2007 9:52 AM
    Jay -- I believe most (maybe all?) of those lots are owned by the state or OneAmerica. Thankfully, a chunk of it will disappear when this project gets off the ground:

    http://216.37.14.55/blog/?p=45
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  • liberty bellAugust 10, 2007 9:58 AM
    I'm a Broad Ripple resident (well, Warfleigh, really) and I would love to see some density happen in our neighborhood. IMO all of College between the canal and the river should be densified - housing over shops would be fantastic.

    Still makes me angry that Cortellini's green condo proposal was shot down - wish I'd been at the meeting.

    And, Sunflower Market is wonderful - please everyone continue to support it!
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  • JoBuAugust 10, 2007 10:03 AM
    Correct me if I'm wrong, but the recent lending crisis is with the residential market. I was under the impression that commercial real estate was not in the same boat. So I hardly see that being a roadblock. Please though, I would sincerely like to know if this is accurate or not.
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  • CoryWAugust 10, 2007 10:24 AM
    Jay-

    I agree that there are a lot of surface lots in the NW quad, but this problem is not just in INdy. Every big midwestern city is plagued by the remenants of urban renewal. I would go as far as saying that Indy is doing better than many of its peers. Ever been to DT Louisville or Detroit?


    As for all of these proposals, I do hope that more than half happen. But more importantly, I am ready for our office vacancy rate to drop. I want a new commercial skyscraper!
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  • ragerunnerAugust 10, 2007 10:54 AM
    Response to JoBu,
    What is happening in the financial world right now is this started as an RE Bust, but because of many different issues (to many to go into) it has become an overall Credit 'Freeze'. If this continues it will affect companies, commercial real estate and just about everything else to get a loan (at least at rates that make projects difficult to fund). Also, many of the projects that are being discussed for downtown Indy are either hotels, residential, or retail (many retailers are also showing signs of slowing sales nationally).

    Here is a link to an interesting blog that talks about the housing bust, and financial issues that are being created by this bust.
    www.thehousingbubbleblog.com
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  • thundermuttAugust 10, 2007 10:55 AM
    JoBu, all these projects on the boards are hotel/condo projects. If the condo market dries up because residential buyers can't get 'em financed (or because the property taxes will be outrageous), then the projects will look a whole lot more speculative.
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  • crankyAugust 10, 2007 11:02 AM
    No the credit is not just limited to the residential market, though that's where ir started with sub-prime lending. It's spending to all financial markets - these bundles of bad loans are buried in mutual funds; it's effecting the money markets, and IPO funding as well. Check this week IBJ or any financial news website - worldwide.
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  • BRipAugust 10, 2007 11:33 AM
    liberty bell, people like you and I need to show up at those Broad Ripple land use meetings. Unfortunately, the only people that have time to go to all those meetings are the retired folks who have nothing better to do than to complain about density.
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  • JosephAugust 10, 2007 11:50 AM
    Does anyone think the uncertainty of property taxes is driving buyers away from Marion County? Couple that with the credit crunch, why would anyone buy right now? Renting a better option?
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  • JoBuAugust 10, 2007 12:16 PM
    Appreciate the feedback from you all, very insightful. I am aware of the bust that is hitting the market here and abroad, but I am more optimistic that there may be a commercial uptick (at least nationally) on the horizon.

    That said, even with the residential components I think these developments will re-tool to meet the demands of the lending institutions (so far as it does not take them out of the primary market they wish to fill). If anything I think these proposals will scale back as opposed to dying altogether.

    Another topic....There's talk about hotel glut, but that's competition at its finest. Joe Dirt Builder says he's going to put up a 30 story 400 room hotel, and market it as the premier option around. As long as he can steal market from the other players, why would he personally care about the glut? As for that matter, why would the lenders be spooked, especially if his business plan had agressive and realistic measures in place to steal and secure market share? Thoughts?
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  • NatAugust 10, 2007 2:20 PM
    In response to CDC Guy, if they are considering having an architectural review process for downtown buildings, considerable thought needs to be put into who will be doing it and what stanards they must follow. As someone who just went through a long, drawn-out process with the Indianapolis Historic Preservation Commission, I can speak from experience when I say if there are no written standards and the staff are allowed to assert arbitrary rules it will ward off investors who don't want to deal with it. While this may not have as much impact on large commercial projects as it does on residential construction, we have to make sure that the city is encouraging investment. With that being said, I understand the need for architectural review and I do believe it serves a valuable purpose, but whoever is in charge has to be able to point to a set of identifiable standards.
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  • ragerunnerAugust 10, 2007 3:10 PM
    JoBu,
    What data makes you think we are going to have an uptick in commercial development? Most metro areas in the US are seeing an increase in office and retail vacancy rates, office consumption has slowed and retail is seeing a drop in sales (which general leads to a slowdown in retail expansion). I guess I am curious what data is showing the potential up swing in Commercial?
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  • JoBuAugust 10, 2007 3:43 PM
    ragerunner,

    I should have expected someone would want data, but since it's not my industry and I don't have a stake in it other than civic interest I don't have hard statistics (why should I, I'm not submitting a business plan).

    My optimism comes from market cycles and the current banking environment. I tend to believe that when the banks hit hard times, a lot of the garbage gets taken out. The residential situation will eliminate a lot of garbage lending that had no business being in the market to begin with. While at the same time, the more astute banks will be scrambling to get back to their core profit centers (commercial lending being one). The banks aren't just going to sit around and lose money on both fronts, and commercial lending is an out. The banks will lend to stimulate the buying power and growth needed to increase profits! So IMHO negative news in the market, residential lending woes, and general skepticism are actually going to lead to a boom.

    I could go on and on about why I believe in my optimistic hunch, but you likely won't agree anyway, and who has that much time. If everyone bet on negative market news, how would it ever rebound? Every negative indicator does not signal market devastation. It's a cycle. I expect to see an uptick in commercial lending & development, and you can say you heard it here first. I personally am looking forward to the next 5 years. I'm just not as skeptical as you, but then again, I'm not supplying the loans!
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  • ragerunnerAugust 10, 2007 4:35 PM
    JoBu,
    I just don't see current market trends showing commercial and office space being absord at a rate that will create demand for a new wave of commercial development to off set the downturn in residential development. On top of that the economy is not current pumping out a lot of new jobs (as a whole) that would create this commercial space demand. I don't feel this is a doom and gloom remark, just a reality remark based on current data. Banks generally will only lend if the investments show a potential for good returns and market demand is there.
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  • NickAugust 13, 2007 7:06 AM
    Okay, mine is not a high minded comment, but since I rarely get to Circle Center anymore, I was shocked to find that there is a Payless Shoe Store going in there. What happened to this mall being a little more upscale and unique?
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  • thundermuttAugust 13, 2007 8:23 AM
    NIck, consider the 1-mile and 3-mile demographics. And think about the lack of chain retail within 3 miles of the circle (other than Family Dollar, Dollar General, and all the auto-parts chains). It's not surprising at all. Not everyone who works in a downtown office can afford $100 shoes.
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  • Wowie ZowieAugust 13, 2007 10:13 AM
    Nat, the IHPC does have written standards for design review. There is a preservation plan for each neighborhood, which must be approved before a district is formed.
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  • NatAugust 13, 2007 12:42 PM
    Wowie Zowie, they do have written standards, but they're very broad. For example, the main requirement is that the new construction has to fit in with the look and feel of the neighborhood. There's not a list of things that you can and can't do. If an agency is holding people to certain standards, they have to be able to point to specific rules and regulations (e.g., you have to have 4 or 5 reveal on your siding), not just general statements that the staff at the agency then extrapolate from. I think part of the reason that there isn't a list is so the agency can have more control over what goes in downtown. And while some degree of control is necessary, too much control drives out investment and ends up being detrimental.
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  • CorrNDAugust 13, 2007 1:24 PM
    Nat -- the IHPC is very specific about design guidelines in the Historic District plans. The problem is that they are only recommendations, not regulations, so developments aren't required to follow them as long as the IHPC approves.

    Quickly scanning the Wholsale District plan, there are 34 pages of design guidelines out of 103 total pages (excluding the building inventory). You can check out all the plans here:

    http://www.indygov.org/eGov/City/DMD/IHPC/Districts/plans.htm
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  • DanAugust 13, 2007 2:35 PM
    So many of these projects are seeking handouts from the city. Rather than being doomed due to the financial crisis, I would think all would just be delayed until after the November election. With the property tax brouhaha, the Mayor's not likely to be handing out taxpayer money for hotel/condo projects until after he's been re-elected.
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  • rush4everAugust 14, 2007 7:32 AM
    Just to make sure everyone is clear, the city does not hand out taxpayer money. When a project like the JW, Conrad or other project seeks government assistance, they do it through TIFs or Abatements. Neither hands over cash. What they do is issue bonds based on the anticipated increase in taxes over what the property brings in. TIFs are typically a district, but do not have to be. Abatements are typically for a single project. The idea being for a short time tax money the city would not be collecting anyway is pumped into the new project, typically for infrastucture but can be used for other reasons. When the abatement is over, then the city collects the full amount.
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  • DanAugust 14, 2007 8:19 AM
    For the JW probject, they are calling it a city incentives package worth $48.5 million. Sounds like more than just an abatement.

    And for MSA, here's IBJ's take:
    Neither of the teams hoping to redevelop the Market Square Arena site mention a specific figure for city incentive in documents filed with the city, but both say they need public money to make their projects work. In the $150-million Market-Ability Partners proposal, the developers suggest a public-private partnership in which the city would reimburse the $6.2-million cost of the MSA land, provide for parking facilities and throw in TIF revenues. In exchange, the city would share in any revenues. In the other $130-million proposal, for The Towers on Market, the developers say they will provide $30 million in equity, seek public incentives and finance the rest.

    City reimbursement, public incentives = taxpayer funded.
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  • CDC GuyAugust 14, 2007 9:38 AM
    The big argument with TIF is something called the but for test: this project would not happen but for the creation of the TIF. I think it's clear that if a project pro-forma requires the infrastructure improvements (utilities, storm sewers, street relocation/reconstruction, parking facilities, public or semi-public spaces, skyway connections to the mall or convention center, sidewalk/public way upgrades, etc.) be paid for by tax dollars, then the project would not happen otherwise.

    Abatements are outright giveaways of tax money (discounts on future tax bills) to the project owner. However, if the development would not happen otherwise, it is eventually a net gain to the city. The MSA site is probably not generating very much city tax revenue right now...maybe a few hundred dollars in wage taxes on the attendants. Even with an abatement, the city gains from the wage taxes on the hundreds of construction workers who would be on the site for a year or two and from the Target employees who would eventually work there.

    We're at the point in this city (with a 1.65% local income tax) that the wage taxes generated by workers will be a fairly meaningful contribution from a big commercial project.
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