Two years ago, Lauth Property Group Inc.’s Intech Park was arguably the most prominent sign of central Indiana’s soft office market.
The northwest-side park’s largest buildings, Intech One and Two, had entire floors vacant and awaiting completion. Acterna LLC was pulling out of its 140,000-square-foot building, a retreat symbolic of the technology bust’s effect on the larger suburban office market.
Today, helped by a robust investment market and Intech’s recent state designation as a certified technology park, Lauth hopes the 5-year-old Intech will lead the way in the office market’s recovery.
Lauth has sold two Intech buildings to national investors: Acterna’s former building, now leased by Eli Lilly and Co., was purchased last year by Wells Capital Inc., and Lauth recently closed on the sale of Intech Eleven, a 70,000-square-foot office/flex building, to DBSI Housing Inc.
Lauth still owns Intech 10, a 116,000-square-foot office building, and a retail center on 71st Street. WXIN-TV Channel 59 owns its office-and-studio building in the park’s northwest corner.
Next on the sale block for Lauth are Intech One and Two, which became fully leased last year when U.S. Customs and Border Protection signed a deal to occupy 128,000 square feet in the two buildings.
Lauth still handles leasing and management for all the Intech buildings, with the exception of Channel 59’s building, and hopes to continue those functions for Intech One and Two, said Lauth Executive Vice President Michael S. Curless.
With a long-term government lease in place, the buildings are likely to fetch top dollar and draw national interest, said John Merrill, first vice president at the local office of Los Angeles-based CB Richard Ellis.
Nationally, there’s a lot of pent-up demand from investors itching to buy attractive office properties and not many on the market, said Merrill, who described potential interest in the buildings with a question: “What’s hotter than white hot?”
“It will be extremely attractive to a large number of various buyer types, including public REITs, private REITs, wealthy private individuals and pension fund advisers,” Merrill said.
Lauth and its advisers in the sale, Washington, D.C.-based Spaulding and Slye Colliers, haven’t put a price on the two-building package, instead issuing a solicitation for offers.
A likely selling price is difficult to gauge because there haven’t been any comparable sales of fully leased, Class A office space in the market in recent months, Merrill said, but $50 million might not be out of reach.
With a sale of Intech One and Two imminent, Lauth is contemplating beginning construction on a third speculative office building just south of the first two. Intech Three would be similar in size to the existing 140,000-square-foot buildings, Curless said.
“Depending on leasing activity and what we hope is the return to more favorable conditions, we’re looking at late 2005 or early 2006 for potential commencement” on construction of Intech Three, Curless said.
Leasing efforts may get a boost from Intech’s status as a certified technology park, a designation announced by state and Purdue University officials April 26.
That status allows a portion of state income taxes generated within the 210-acre park to be used for bond interest payments or for financing of public facilities within the park, according to the Indiana Economic Development Corp.
The park status comes with three tenants for Intech: satellite offices for West Lafayette-based Endocyte Inc. and Bio-Analytical Systems Inc., and headquarters for Andara Life Science Inc., a Purdue-led startup.
The total space those three companies will occupy is still being finalized, Curless said, but they will likely land in Intech Ten, where Purdue has outreach offices. Intech Ten has about 25,000 of its 116,000 square feet vacant, he said.
Intech Three would be the second speculative office building announced this year. Locally based Duke Realty Corp. has begun construction on Nine Parkwood Crossing, a 205,000-square-foot building about one-quarter preleased to Minnesota-based American Family Insurance, which will occupy 53,000 square feet in the building.
Although developers are once again beginning to consider spec office buildings, Lauth and other local developers have said construction is unlikely without significant chunks of space preleased.