The developer of what was to have been a tax-credit-financed project in Lockerbie Square now intends to develop market-rate housing instead.
The Whitsett Group announced last summer that it would build 190 affordable and market-rate apartments and 44,000 square feet of retail and office space in three mid-rise buildings at the northwest corner of Michigan Street and College Avenue.
Whitsett was counting on selling state-issued affordable housing tax credits to finance the $27 million project, but it wasn’t among the projects awarded credits by the Indiana Housing and Community Development Authority earlier this year.
“We came up just a few points short,” said company principal Joseph E. Whitsett. “But we own [the land] and we are going to develop it.”
Whitsett said his company anticipates breaking ground next spring on essentially the same project, minus the affordable housing component. By that time it should be the second market-rate project for Whitsett, which up to now has focused on affordable housing.
Its first market rate project will be the redevelopment of the American Building, a 10-story building at the southeast corner of Vermont and Pennsylvania streets formerly owned by Gannett Co., the parent of The Indianapolis Star.
Whitsett bought the building for less than $1 million in February in partnership with Ambrose Property Group. Financing for the 72-apartment project, which will cost between $7 million and $10 million to develop, should close in early September with construction starting later that month, Whitsett said.
Whitsett bought the 2.4-acre Lockerbie site for about $500,000 from Greenwich, Conn.-based Starwood Capital Group, which had acquired it as part of a block of foreclosed properties from Cincinnati-based Fifth Third Bank. The land had been owned by a partnership of Dinmont Development and Hearthview Residential that developed 22 townhomes on the west edge of the property along Park Avenue. That development stalled, landing the rest of the site with the lender.
The property was part of a larger tract that had been the subject of an ambitious mixed-use development plan that unraveled in late 2001. Whitsett might end up with more of that land before all is said and done. Two more parcels, one a half acre and the other three quarters of an acre, that had been part of the original development plan went on the market last month. Both are on the west side of Park between North and Michigan streets. Both wrap around, or include, buildings that dot the half-block.
The parcels, listed with Ross Reller of Colliers International, are offered for $32.50 per square foot. Whitsett said his firm and the property owner are on good terms but couldn’t agree on a price and decided to end negotiations, at least for the time being. “We’re still interested," he said, but “developing around the existing buildings makes it tricky.”
It’s not as if Whitsett Group doesn’t have plenty to work on. The firm, founded in 2007, has become one of the city’s most prolific developers of affordable housing. It’s just finishing up a $7.2 million project at 10th and Central that involves 86 apartments in a retrofitted building and new construction.
On the drawing board are high-profile projects that would replace the demolished Keystone Towers at Allisonville Road and Fall Creek Parkway and Winona Hospital at 3295 N. Illinois Street. The towers and hospital were demolished by the city in the last year.
At the Keystone Towers site, Whitsett plans to build up to 140 apartments in a $22.5 million project called The Point on Fall Creek. The hospital is to be replaced with the $6.5 million, 50-unit Illinois Place apartments.
Whitsett, a former tax attorney at Ice Miller who later worked for the developer Pedcor Cos., has been adding staff to accommodate his firm’s packed development pipeline. His construction staff has grown from two to 11 in recent months and the firm’s development team added two, for a total of five.
George Tikijian, who owns the apartment brokerage Tikijian Associates, said the downtown rental market remains strong and can easily absorb the projects Whitsett is planning in downtown proper.
“Those projects aren’t the ones that will stress the market,” Tikijian said. The test, he said, will be what happens when approximately 1,000 market rate units open in the next few years spread between Buckingham Development’s CityWay project at Delaware and South streets, Milhaus Development’s 451 Market at East and Washington streets, and Flaherty & Collins’ Block 400 project at Capital Avenue and Michigan Street.