Lingering questions for $150M North of South plan

September 28, 2010
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North of SouthLeaders of Eli Lilly & Co. and Buckingham Cos. joined the mayor Monday to announce new details of a development proposal dubbed North of South that would include a boutique hotel, YMCA branch, retail space and upscale apartments, all on 10 acres north of South Street between Delaware Street and Virginia Avenue. The city has agreed to finance the vast majority of the project, more than $100 million of the $150 million total, using a couple of sources including a public loan backed by TIF revenues. It certainly looks like a great project and a great deal for Buckingham, which would contribute about $7 million. Property Lines is always happy to report new development projects with a strong shot at success. (Particularly when accompanied by fancy renderings.) But there are lingering questions with this one. Other developers who have tried similarly ambitious projects in the area won't be thrilled with Buckingham's generous taxpayer assist. Allen Commercial has been trying for years to build a mixed-use project dubbed Penn Centre on the surface parking lots to the west of Conseco Fieldhouse, without demanding public money to make it happen. Urban Space had proposed a residential and retail project called Ralston Square for a surface lot north of South Street between Meridian and Pennsylvania streets. And broker Ryan Zickler unsuccessfully sought city help in building a $480 million mixed-use development called Legends District SoDo just a block away from the proposed North of South. A publicly financed competitor could hurt the other projects' chances of landing private financing. Another question is whether the project will lead to another delay in redevelopment of the Market Square Arena site. At the press conference, Mayor Ballard called the project "innovative." Indeed. Any of the earlier proposals could have been innovative, too, had they enjoyed the support of an $86 million taxpayer-backed loan. Is it not a bit ironic that the mayor wants taxpayers to effectively invest in a boutique hotel, retail space and a YMCA branch on 10 acres downtown while selling the entire city's parking meters to a private firm? I guess we'll have to wait at least a few more years for public investments in stadiums and convention amenities to pay off with a large and privately financed downtown development. Meantime, stay tuned for more details once the deal is finalized.

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  • Wow
    Indianapolis needs to publicly finance another hotel?

    Because Indianapolis needs temporary construction and low paying service jobs?

    I could see this if we were talking about attracting the headquarters of ImClone which Eli Lilly bought for $6.5 Billion in 2008.(they have a New York HQ)

    I could see this if we were talking about attracting the headquarters of Mead Johnson to Indy (They recently moved from Evansville IN to Chicago).

    I could see this if we were talking about attracting the headquarters of Sallie Mae. (They recently moved from their HQ from Virginia to Delaware)

    I could see this if we were talking about attracting back the headquarters or major operations of Lincoln National, Ball Corp, Gannett(Indy Star), Duke Energy (Cinergy), AES (Indianapolis Power & Light), AT&T (Ameritech), Chase (Bank One), PNC (National City),etc............

    But another hotel?????????
  • Time for new airport
    We need a new and bigger airport
  • NoSo
    North of South? So it will naturally be called NoSo, right? Anything with the letters No in it, won't be good. i.e. IndiaNOplace....
    • SoNo
      Maybe it should be SoNo instead of NoSo ;)
    • Who donated to whom?
      Who donated what to whom to get this sweetheart deal approved? Dig deeper, Cory--this deal smells of favoritism
    • A Gift?
      this is for my friend Josh: "Boondoggle".
    • hmmm...
      I'm a little weary of anything using a tax-payer backed loan, especially because we're still trying to pay for LOS. Who's behind this? And, what's with the current trend where many new proposals include a new YMCA (i.e. City Market proposals)?

      Cory - good to meet you last week.
    • No Go on NoSo
      No public money. Enough of spending taxpayer $$$ to enrich already wealthy companies. If Lilly needs this development so badly, they can fund it entirely.
    • Yeah...
      ...Let's not use taxpayer money to fund development in a very key, very underdeveloped section of our downtown. Let's use it for much more important things like... welfare checks for lazy, uneducated hill-jacks and hood rats who would rather sit on their butts than go out and look for a job. Then use their "EBT" cards out fast food restaraunts and pretty much any other place now, since it would be unconstitutional to tell them where they can spend "their" money. Let's use it for programs that pay to feed and care for the children of the irresponsible knuckleheads running around creating illegitimate babies they can't afford to raise on their own. I'm sure we can find TONS of much better uses....
      • Unreal
        When is this all going to stop???
        • Well...
          ... if this doesn't happen now, it will be years and years before anything happens in that area and, frankly, that's pitiful. We spend 100's of millions to build a state of the art sports facility then leave it to sit amid a wasteland of parking lots and industrial buildings. This is the face some of you would have us show the world when they turn into the Super Bowl? The money will be LOANED, not given. And our city is no different from any other major US city in the methods it uses to encourage development. It is the rare thing to find a major project ANYWHERE in this country that is entirely privately financed. That's just the reality of the current economy.
        • Just Starting
          Huber tells Inside Indiana Business he is just getting starting with many more to come.

          Please note Gary Dick has decided not to be on camera with this dope.

          http://www.insideindianabusiness.com/newsitem.asp?ID=43868
        • Watching A Car Wreck
          Appears Huber is determined to exit in a burst of flames.
        • Consider This
          Consider the fact that the private market will not support this investment because people in the business of loaning money consider it a poor investment and too risky. Yet our City officials feel so smart that they think they are right when those who make a living loaning money are wrong.

          There is no way the City should be doing this. It's outrageous that the Ballard adminstration even proposed wasting taxpayer money in such a risky venture.
        • something people will really use
          When are they going to put a Super Target downtown or maybe a Trader Joe's?
        • I support this 100)%
          Cory, I disagree that this project is similar to Ralston Square, Penn Centre, or even the similarly-scaled SODO.

          Those developments were primarily focused on smaller combinations of components, such as hotels + entertainment, or retail + residential.

          North of South is different, and wins the city's investment, because it combines all the elements those projects offered into one cohesive package with a higher purpose: It supports and enhances the capabilities of Lilly, Wellpoint, and Anthem. It creates important connections between each of them and the city center. In all actuality, it better connects downtown and that business district to the entire southeast side. This, in addition to the beautification, infrastructure and quality of life improvements, is what makes this a great proposal. This is not just another hotel, or set of condos.

          The city made a wise decision and waited for the right opportunity and chose the right developer to partner with. If the city handed out money to every project mentioned here, then the critics of government investment might have a point. But they are not acting carelessly and the city chose North of South as a project worth investing in. I agree with their decision.

          This development will help lead to an economic environment in Indy that will enable other developments to acquire private funding, not the other way around.
        • Consider the fact that the private market considers most projects a poor investment and will not loan to them. That goes for many home loans as well. The pedulum has swung from easy credit to seized up credit.

          This project makes some sense in that Lilly is backing it with I am sure the promise of filling the hotel and providing workers, along with Anthem and Farm Bureau, to use its facilties, shop at its stores etc....

          As far as corporate hq's, this is probably more about keeping corporate hq's here then attracting new ones, but Lilly's has said that this will aid them in attracting high dollar talent.

          I have a relative who works for Lilly who came back after an overseas assignment. Wanted to live downtown in close proximity to Lilly. Best he could do was an apartment on the canal. distance and poor mass transit made it impossible to walk to work and ammenities, so he moved to burb's.

          He said he would have moved into an apartment in this development if it were available. I think this will be a catalyst for development in the southeast quad with the final linkage between downtown and fountain square.
        • Agree with ablerock
          If the city is going to help push something along, then this appears to be the kind of development that should be done. So long as it holds closely to the renderings, this should be a big win for Indy. Those of us who decry poor design in Indy are all pretty hopeful that this one goes as the renderings show. It looks like someone has been keeping up on recent design trends.

          Maybe this could be the kind of development that leads by example and other will spring up like it around DT Indy once the recession's tight wallet syndrome loosens.
        • Good points
          Thanks to Ablerock, Indyman and everyone else for weighing in. Another point worth adding: This project makes the Faris Campus much more marketable to new tenants including potentially a new corporate HQ, now that Lilly is moving out.
        • Public vs. Private investment
          2 points about the private market vs. public investment to the naysayers:

          1. The private market isn't loaning much money to anyone right now. It has nothing to do with the merits of the project. The city is in the position to make a wise business investment and is doing so.

          2. The private market and the city will determine what constitutes a successful business development using different critieria:

          By definition, the "private market" is primarily interested in high-dollar, personal-gain profit margins, nothing else. It's not about helping the city or other businesses, it's about making big money for the investors.

          The city, on the other hand, is concerned about the well-being of entire region. It can operate out of an entirely different investment paradigm. It has the privilege of being concerned only with getting investment dollars returned. "Profit" is measured differently. The city is in the city-strengthening business, not the high-profit business. Project benefits such as quality of life improvements, an expanded tax base, better infrastructure, and a strengthened business environment all add to the "profit margin" of any project they'll consider supporting. North of South is chock-full of profit for the city. It will pay off in more ways than just dollar signs.
          • Conceptual Renderings Look Great
            I agree with Curt, this is exactly the kind of development local urban design critics hope for.

            Buckingham understands proper urban-context design. Here's hoping they stick closely to the conceptual drawings. (and here's hoping they get to develop the sea of parking lots in the northwest quad!) From what I can see via the renderings, I support the project's design 100% as well.
          • Merits
            Apartments, which is what Buckingham primarily does, can be privately financed right now if the project has merits. Compared to other real estate classes, apartments are the easiest to finance. Hotels and retail are much more dicey. It is likely that part of this project could be financed but not all. The city is too easily giving away too much money in this deal. I am all for additional development on the east side of downtown and the city should encourage that where possible but this deal is much too juicy.
          • Sounds like the City is only providing guarantees on part of the project.
            • How?
              The city is providing much more than a guarantee. Somehow the city is giving Eli Lilly $15 million toward this project for NOT meeting it's obligations to create 7,500 new Indiana jobs as part of a $214 million incentive package ten years ago.

              I would think Eli Lillyseould owe taxpayers money, not vice versa.
            • Hear, hear!
              Well stated, Ablerock. This IS the type of project the City should promote with financial support.
            • More positive than negative
              This project, because it's well designed mixed-use, will be a catalyst for future development in this area, so it's a reasonable bet by the city.

              Some of the story's comparisons to other failed schemes don't ring true, due to Buckingham's reputation and track record. They hire the right architects (not their nephew's roommate) and perform excessive due diligence.

              Additionally, I think the project stands a good chance of indirectly enhancing the Fletcher Place and Fountain Square neighborhoods over the next 10 years.
            • Paid PR Troll Alert
              Appears this IBJ article has gotten the attention of the cities and Lilly PR teams who are posting empty comments of support when presented with disturbing details and concerns.
            • Good in general
              I feel we badly need more local residents downtown for it to become something more than an event center, so I'm glad to see apartments.

              Cities are in a competitive environment, the same as companies. Companies have to be located in an attractive place to their employees or they will leave, period.

              Ask Dallas how they changed development practices when companies started leaving. They built many parks, planned the Trinity Corridor and in general started planning for a thriving downtown. They have gone from 400 downtown residents to 30,000.

              I think in general, we need to build more than large footprint, low density apartment buildings, however. That's not an attack on the design. We all have to pay attention to market realities, and people want to do stick-built development, but we also need many more bodies downtown if we really want all of our retail spaces to be vibrant and not have the whole downtown covered in parking garages and struggling storefronts.
            • NY Calling?
              New York Times Fears Losing Imclone to Indianapolis

              C . Anthony Butler of Barclays Capital called for Lilly to make some drastic changes, predicting that its revenue could drop to $18.8 billion in 2015. â??Iâ??m not sure what would drive the going-back-up part,â?? he said in an interview.

              He also cited the companyâ??s longtime relationship to Indianapolis as an impediment to taking measures like slashing costs to preserve its margins and dividends. â??I worry that they canâ??t do that because theyâ??re too ingrained in the fabric of the community,â?? Mr. Butler said.

              Indeed, since its founding here in 1876, Lilly has become the cityâ??s largest private employer. Mayor Greg Ballardâ??s father worked there for 33 years; the former mayor, Bart Peterson, works there now; and Indiana Gov. Mitch Daniels spent eight years on the Lilly campus.

              In a medium-size deal, its biggest purchase ever, Lilly bought ImClone Systems for $6.5 billion in 2008. On Tuesday, in New York, Lilly announced that about 140 cancer researchers from ImClone were starting to work in a new life sciences complex near Bellevue Hospital and NYU Langone Medical Center.

              http://www.nytimes.com/2010/10/01/business/01lilly.html?src=busln
            • Pictures Worth Thousand Words
              Wouldn't these life science buildings look nice in Indianapolis?

              http://www.indystar.com/article/20100929/BUSINESS03/9290316/Eli-Lilly-powers-up-its-NYC-cancer-research-center
            • Aiming Higher?
              Indianapolis Spends $150 Million on hotels and a YMCA.

              New York Spends $57.4 Million for a new $700 million biological science complex expected to support about 2,000 bioscience related jobs.

              The city of New York is contributing $13.4 million for the construction of the park, while the state is putting up $27 million. Additionally, the New York City Investment Fund is providing $15 million for the project. $2 million in Federal Funds have also been secured.

              http://www.insideindianabusiness.com/newsitem.asp?ID=36771

              NY Incentive Deal
              http://www.costar.com/News/Article.aspx?id=BB2C6207BEA1026996EE7782A215567E&ref=1&src=rss
            • Reader, do what your name claims. Read. The city is not giving $150 mil, they are guaranteeing it. Lie a cosigner so the project gets a reasonable interest rate.

              A process used many times and has proved very profitable for Indy and business.
            • Here are the facts
              Deal Breakdown;

              $86 Million - Indianapolis Bond Bank
              $15 Million - City of Indianapolis (Payment thru Eli Lilly?)
              $9 Million - City of Indianapolis (utility/sidewalk/roads)
              $15 Million - City of Indianapolis Lease of Eli Lilly Parking Lot
              $6 Million - State of Indiana through a Community Development Block Grant
              $18 Million - YMCA
              $7 Million - Buckingham Companies
              None - Dolce Hotels and Resorts
              None - Wellpoint
              None - Indiana Farm Bureau
              $156 Million Total Project Cost

              84% Government Funding - $131 Million
              16% Private Funding - $25 Million

              Why does the City owe Lilly $15 Million from a project done at Lilly's technology center campus off Kentucky Avenue in the 1990s???

              Why doesn't Eli Lilly owe the city and state $214 Million for not meeting its pledge 10 years ago to create 7,500 jobs and invest $1 Billion in our city?

              Why build a government funded hotel when the new JW Marriott, area hotels, and new convention center are leased out less than 50% of the year?

              Sources:

              Eli Lilly Gets Indianapolis Incentives of $214 Million for $1 Billion, 7,500-Job Deal
              http://www.siteselection.com/ssinsider/incentive/ti9909.htm

              Eli Lilly To Layoff 5,500 Workers Mostly in Indiana
              http://www.thestreet.com/story/10598070/eli-lilly-to-lay-off-5500-workers.html

              http://www.insideindianabusiness.com/newsitem.asp?id=37661

              Indianapolis Star 9/28/10
              http://www.indystar.com/article/20100928/BUSINESS04/9280313/City-may-offer-86M-public-loan-for-project-near-Lilly-campus?odyssey=tab|topnews|text|IndyStar.com



            • Parking
              Wonder if ACS will run the Two new parking garages with 800 spaces for the city?
            • Loan or tax break
              I get that the $9M in street/sidewalk improvements will be financed by issuing TIF bonds and will be paid off by the increase in property taxes paid after the project gets constructed. Here's my question though: What about the $86M "loan"? Is that also paid back through the project's future property tax payments, or is it separate from the property taxes? If the project is unsuccessful, how does the $86M get repaid?

              And what is the explanation with the $15M from the City on behalf of Lilly? Did I read that right? Who's going to explain how Lilly gets credit for City funding of the project when Lilly should be repaying tax abatements for which it didn't meet its promises? Cory, can you find answers to these questions?
            • How about neither!
              You proposed a false dichotomy; those are not the only choices and actually it is not a choice at all, since the city does not fund welfare. The choice is between transferring wealth from the many to the few or providing and maintaining basic infrastructure and other fundamental public services for the many. The city chooses time and time again to steal from the many and give to the few.

              By the way, it is underdeveloped, because all of those Lilly people live and shop elsewhere.
            • Mr. Ponzi strikes again
              When the private market was loaning money for projects, it had nothing to do with merit, as they were running a Ponzi scheme.

              The Ponzi scheme collapsed and now the banks are riding the funny money train and hoping that it does not derail. But it will, and stupid municipalities who guarantee funds for development for which their is no demand (where is the market study? - that should have been public record look before this theft was announced) will further impoverish their remaining citizens enslaved by public and private debt, while those fairly free of such will flee with their ill-gotten gains, while laughing at our stupidity.

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            1. "bike lanes, specialized lighting, decorative signage, public art, grass medians, trees and rain gardens" These are all nice things to have, but can we freaking get the hundreds of potholes all over the city fixed first?!?!?!!?!?!

            2. When a criminal with multiple prior convictions serves five days of a one year sentence and later kills a police officer with a weapon illegally in his posession, residents of Boone County need to pay a tax to drive to work... PERFECT Progressive logic.. If, on the other hand, a fund were to be set up to build more prisons and hire more guards to keep the known criminals off the streets, I'd be the first to contribute.

            3. Not a word about how much the taxpayers will be ripped off on this deal. Crime spirals out of control and the the social problems that cause it go unheeded by an administration that does not give a rats behind about the welfare of our citizens. There is no money for police or plowing snow (remember last winter) or or or or, but spend on a sports complex, and the cash flows out of the taxpayers pockets. This city is SICK

            4. Sounds like a competitor just wanted to cause a problem. I would think as long as they are not "selling" the alcohol to the residents it is no different than if I serve wine to dinner guests. With all the violent crime happening I would think they should turn their attention to real criminals. Let these older residents enjoy what pleasures they can. Then again those boozed up residents may pose a danger to society.

            5. Where did the money go from the 2007 Income tax increase for public safety that the Mayor used to stir opposition and win the election and then failed to repeal (although he promised he would when he was running for election)? Where did the money go from the water utility sale? Where did the money go from the parking meter deal? Why does the money have all these funds for TIF deals and redevelopment of Mass avenue, and subsidy for luxury high rises, parking garages in Broad Ripple, and granola chain grocery stores but can not find the money to take care of public safety. Commuters shouldn't have to pay the tax of failed leadership in Marion County by leaders that commuters have no say in electing. Taxation without representation.

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