Developers struggling to meet the pre-sale threshold for high-rise condos on the Market Square Arena site have tapped a Chicago firm to formulate a more marketable mix for the first phase.
Mesa Development LLC is working with the team on a fee basis, said Terry Parrott, manager of Market Square Partners, which was chosen nearly a year ago to build twin 29-story, 225-unit condominium towers and 175,000 square feet of retail space on the four-acre site formerly occupied by Market Square Arena.
Developers hope Mesa’s expertise will help them reach a 50-percent pre-sale threshold required to begin work on the $70 million first phase.
Brookline, Mass.-based Diamond & Co., touted as the team’s development firepower in the original Market Square Partners bid, is no longer involved with the project.
“We felt we needed support from a developer with greater high-rise and more Midwest experience,” Parrott said.
Diamond has had little involvement with the project since late 2003, Parrott said, but firm principal Merrill Diamond was on hand at the press conference in February 2004 when the city announced Market Square Partners as the winning bidder.
Diamond declined to comment on why the developers parted ways, but he said he still thinks the redevelopment is an exciting project.
“I really miss the city and miss the people I met,” Diamond said. “I wish I was still involved, but it worked out best for everyone that I not be.”
The main players in Market Square Partners haven’t changed, Parrott said. Parrott’s company, Columbus, Ohiobased Smoot Management Group, and Crossroads Development, led by former deputy mayor William Shrewsberry, remain the two equity partners in Market Square Partners.
Chicago-based Consoer Townsend Envirodyne Engineers Inc. is not an equity member, but is a limited guarantor under the terms of the partnership’s agreement with the city. CTE has also contributed pre-construction costs to the project, Parrott said.
Local CTE Vice President Michael A. Comparato had acted as the public face of the development team until December and signed the project agreement between the city and Market Square Partners on behalf of CTE. Comparato has been reassigned to other CTE projects, Parrott said. CTE’s Don Currise is still involved with the project’s planning and design, he said. Comparato didn’t return phone calls from IBJ seeking comment.
The first phase of the Residences and Shoppes at Market Square called for construction of retail space and one condo tower on the northern half of the site to begin by Dec. 1, 2004. In December, the city agreed to give Market Square Partners additional time to sell the 100-plus condos needed to secure construction financing and begin work on the tower.
As of December, only 41 condos had been sold. That number remains unchanged, Parrott said. The team has essentially halted marketing of its condos and retail space while it tweaks condo sizes and prices.
Market Square Partners will meet with the city next month to present its revised plan, which will include a greater number of more moderately priced units, Parrott said.
If, as expected, Market Square Partners doesn’t meet pre-sales requirements and close on the land for the first phase of its project by Feb. 11, the city and the developers have 30 days to discuss the development’s future, according to terms of the project agreement signed with the city in June. If no agreement is reached by the end of the 30 days, the city has the right to terminate the agreement and award the project to someone else.
The city has kept in regular contact with the development team but expects to know more about the site’s future next month, said Jennifer Weflen, deputy director of the Indianapolis Bond Bank. The Bond Bank and the city’s Department of Metropolitan Development have been working together closely during bid selection and implementation of the redevelopment project. She indicated there’s no reason to believe the city won’t extend the agreement if the developers present a viable plan for the project to move forward.
Up to now, the city has invested time and manpower, but no cash in the redevelopment. Market Square Partners’ bid was the only one of six original bids not to ask for city incentives. The group has already paid the city $1 million toward affordable-housing programs, money that can’t be refunded.
“The reasons we chose the project are still there,” Weflen said. “We knew it was more risky in terms of getting it done, but it’s not risky at all in terms of the city. That hasn’t changed.”
Observers agreed that the city has little to lose by giving Market Square Partners more time. However, several local developers have since the beginning questioned whether such an ambitious project can be pulled off without some form of city incentives such as tax breaks, site improvement, a discount on the land cost, or infrastructure.
Parrott said his team still believes its plan for the site is viable and will work with the right mix of condo units, specifically more units geared toward young professionals looking for downtown condos in the $200,000 price range. Mesa, a co-developer of the 57-story Heritage at Millennium Park condo and retail tower in Chicago, was brought on to help achieve a better mix of units, Parrott said.
Since development teams submitted proposals for the former Market Square site in February 2003, more than a dozen downtown condo projects have been announced or started, adding hundreds of condos to the market.
At least two of the other five original bidders would jump at the chance to resubmit proposals for the Market Square site.
“Sure I’m interested,” said Gerald Kosene, whose firm, City Centre Associates LLC, submitted a proposal to build 240 apartments and 160 condominiums in mid-rise buildings on the Market Square site.
City Centre has been on a development tear in the area just north and west of the Market Square site in recent years. The firm’s original two downtown projects, the Clevelander and the Packard, have sold out, and work has begun on a third, the Hudson, at the corner of New Jersey and Ohio streets. That project has already sold 40 percent of the 75 planned condos ranging from $250,000 to $700,000.
City Centre has two other condo projects on the drawing board: the DeSoto, a 33-unit project set to begin this spring at the southwest corner of New York Street and Park Avenue; and the Maxwell, which will comprise 82 units at the northwest corner of Park Avenue and Ohio Street.
The other finalist for the project, MSA Development, also proposed a high-rise condo tower, but as a final phase. Initial phases would have included mid-rise condos at lower price points than Market Square Partners’ original proposal, said James E. Thomas Jr., a partner at locally based Hearthview Residential and a member of MSA Development.
Like Kosene, Thomas said his group would be glad to make another run at the site, albeit with a different development plan than Market Square Partners’.
“We think our proposal would still be valid as submitted, although if there are alternate scenarios the city has come across, we would be happy to discuss those alternatives as well,” Thomas said.