Commercial Real Estate Power Breakfast transcript

Indianapolis Business Journal gathered leaders in the state's commercial real estate and construction industry for a Power Breakfast panel discussion Sept. 13.

Panel members included Rich Forslund, Summit Realty Group partner, office advisory; Jacque Haynes, Cassidy Turley senior vice president; Sherry Seiwert, Indianapolis Downtown Inc. president; J. Jake Sturman, JLL executive vice president; Brian Sullivan, Shiel Sexton Co. Inc. managing partner; Joseph Whitsett, TWG Development LLC CEO.

The discussion was led by IBJ reporter Scott Olson.

The following is an unedited transcript of the discussion.

                            OLSON:  Morning.  Quick story:  We had a
             little get-together about a week ago and the guys talked
             about not wearing ties and I didn't know if they were going
             to be serious, but apparently they were.  First off, we
             have Rich Forslund.  Rich is a partner at locally owned
             Summit Realty Group and has completed more than $450
             million in office building transactions.  Rich earned his
             bachelor's degree from Indiana University in
             telecommunications with an emphasis on marketing and
             advertising.  In his spare time he enjoys playing with
             Barbie Dolls, having his nails painted, and eating snow
             cones.  He has three daughters and pretty much does
             whatever they want and his wife wants to do.
                     Next up is Jacque Haynes.  Jacque has 26 years of
             commercial real estate experience specializing in landlord
             and investor representation through development, leasing,
             asset management, acquisition, and disposition of retail
             shopping centers.  Jacque is a Certified Commercial
             Investment Member, she is an avid golfer and makes pottery
             with her own pottery wheel and kiln.
                     Next up is Sherry Seiwert.  Sherry is president of
             Downtown Indy, formerly known as IDI established in 1993 as
             a private not-for-profit.  Downtown Indy addresses issues
             that affect the area's growth and well-being by focusing on
             development, management, and marketing.  Sherry previously
             served as executive director of the Indiana Housing and
             Community Development Authority.  She is a graduate of the
             Indiana University School of public and  environmental
             affairs and enjoys riding her Harley.                 Next
             up is Jake Sturman.  Jake is executive vice president of
             Industrial Logistics and Corporate Solutions Group in Jones
             Lang Lasalle's Indianapolis office.  Prior to joining JLL
             he was a principal at Meridian Real Estate and since 2002
             has completed $500 million in transactions.  He received a
             bachelor's degree in human and organizational development
             from Vanderbilt University and enjoys water sports and
             outdoor activities.
                     Next up is Brian Sullivan.  Brian is managing
             partner of Shiel Sexton which he joined in 1996 as partner
             in charge of business development for the general
             contracting and construction management firm.
             Brian received a bachelors degree from Ball State
             University and enjoys cycling, recently returning from a
             Colorado cycling trip.  He also enjoys photography and is
             President Obama's official event photographer when he
             visits Indianapolis.
                     Next up is Joseph Whitsett.  Joe founded the
             Whitsett Group now known as TWG Development in 2007.  The
             full-service real estate firm specializes in revitalizing
             vacant buildings for affordable and market rate housing.
             Joe graduated from Indiana University with a bachelor's
             degree in accounting and later earned a law degree from the
             University.  He spent time at the Ernst & Young Accounting
             Firm and the Ice Miller Law Firm before founding the
             company.  In his free time Joe enjoys spoiling his
             grandchildren to the greatest extent possible.
                     Welcome.  Thank you for your time today and a quick
             note on the format.  I will throw a question out either to
             an individual panelist or the entire panel.  Everyone
             please way in and let us know your thoughts, take a minute
             or two most so we can cover a lot of ground.  In the
             meantime, audience members please write down your questions
             and we will get to them soon.
                     I will go ahead and start with you first, Rich.
             Concerning the office market, what are the biggest
             challenges facing the downtown office market, and at the
             same time, what are some of the opportunities.
                            MR. FORSLUND:  Well, I appreciate going
             first.  It reminds me of why I used to sit in the back of
             the classroom.  I would say the main three that seem to be
             talked about right now quite a bit would be the office
             vacancy in the towers, the parking, and you know probably
             the justice center.  You know, in regards to the tower
             vacancy, we are probably at about 20 percent, and the issue
             is they have just basically become — they dropped out of
             vogue.  You know, people want more of a creative type of
             building, looking to feed a culture and ultimately, you
             know, basically feed into the millennial discussion that's
             taking place right now.  As far as the opportunity within
             that class, I think what people need to do is basically
             start to merchandise those buildings a little bit more.
             Basically walking into the building and simply looking at
             it that that main lobby is a place to rub your feet and get
             the dirt off is no longer really the discussion.  It is
             really a discussion of how do you turn that more into a
             Starbuck's scenario, how do you turn that into something
             that people are wanting to come down and drop into,
             something that people want to ultimately create as part of
             their space as well.  So that's sort of that piece, and I
             think there is groups that are doing that pretty well.
             There is a lot of groups that in big cities are doing this
             right now.  I will just give you an example, a group called
             Hearn that bought the John Hancock building.  It was just a
             normal, typical office tower.  Basically those guys have
             taken that and they have created the plaza, and although it
             is an iconic building, it is just a building.  So they have
             taken that plaza and they have decided they are going to do
             something neat with it.  As far as creating sort of a
             theme, they are doing a studio almost there, you know,
             where they have groups that come in whether it is Dave

Matthews or what have you, they will come in, they will go
             there, and it is just creating this ultimate vibe.  So,
             again, it is merchandising.
                     As far as the parking, where I go with the parking
             is right now there is a lot of, you know, development,
             positive development taking place.  So if you look at
             Cummins and if you look at the Flaherty deal, et cetera, it
             is all wonderful things but of course we have got surface
             parking that is going to be disappearing in there.  So the
             discussion is how do we react to that.  What I would
             suggest is we have got parking opportunities out there.  It
             is really just a change of a mindset.  When I say that,
             bigger city mindset is what we probably need to be sort of
             leaning towards.
                     I can't tell you how many times, and this just
             happened recently, where we are looking at a space with a
             prospective tenant, you are in a gym, you are talking about
             how they are going to wind out this wellness piece, you
             know, they are asking about the elliptical and looking at
             the treadmill, et cetera, and then as soon as the question,
             now, where are we going to park and you mention we have got
             options here three blocks away.  Three blocks?  And it just
             down — you know, it is the urban, it is what it is.  It is
             part of being urban.  I think to change that mindset we
             could have lot of issues as far as the downtown discussion.
                     The other thing is just getting creative as far as
             the actual operator.  Maybe you do a collective shuttle or
             some type of circulator or something like that, especially
             with all the multi-family that's kicking up, mixed use, et
             cetera that's sort of kicking around, do something like
             that.  I know the guys over at Ambrose did a — they had to
             accommodate a very dense use over at Landmark.  They did
             valet.  So there are ways to play with this.
                     The other thing is if we are truly buying into the
             wellness discussion and we are truly going to try to
             implement those things, obviously walking would be part of
             that, so incentivising those to walk.  I think from those
             that know, I think you are supposed to have like 10,000
             steps a day or something like that; is that right?  So
             10,000 steps a day and I think we equate it — I did some
             quick math on this so I am not going to mess this up — but
             in regards to steps, let's see, we are looking at 350 steps
             in a block, five blocks, 1500 steps, so it is not that bad
             even if you are going five.  So we have got that.
                     And then in regards to the justice center, I think
             the main issue there is just the question mark that
             surrounds it, right?  So what is it going to happen there?
             A far as — and obviously it is hard to do anything when
             you don't know, right?  In regards to the opportunities
             there — I am being told to move — as far as the
             opportunities there, I think it could just open the east
             side up quite a bit.  There is a lot of people that are
             sort of already making moves on Delaware.  We have worked
             with some groups that are sort of buying and hedging on
             that, so I think ultimately there is a lot of opportunity
             that could come of that.
                            OLSON:  All right.  I will follow up
             with Sherry.   You brought back the downtown initiative to
             address the vacancy.  As financial firms increasingly move
             to the north side to be closer to their affluent clients,
             what kind of firms do you think will fill the void.
                            EIWERT:  Tech firms.  That's really who
             we are hearing from.  But as Rich said, they are looking
             for that open collaborative space.  And he alluded to the
             criminal justice center, I think that we would lose a lot
             of bail bondsman and that type of service, which I think
             would be backfilled ideally by some of the small tech firms
             and that is really who is wanting to move downtown at the
                            OLSON:  Okay.  Anybody have anything
             they want to add on office before we move on?  Joe, I will
             go to you.  Staying downtown, it seems the Cultural Trail
             hasn't had a huge impact in terms of attracting retail and
             housing.  Where has the trail had the largest impact and
             are there other areas of downtown that might be ripe for
                           WHITSETT:  Well, it seems like the place
             where we are not developing right now, the Virginia Avenue
             down to Fountain Square certainly has, the trail has
             apparently it seems to me made a major impact right now in
             development retail and restaurants and clearly the
             apartment market that has I think now the creeping or
             moving into the neighborhood off of Virginia Avenue even
             into the single family market which is a great thing.  You
             know, the other areas we are looking at and I think are
             great for development, clearly the northern suburbs are
             still strong.  We have got Carmel and Fishers that are on
             fire still in the multi-family area.  Downtown we like the
             near south side.  The west side is the criminal justice
             center and things are happening on the west side already
             and the two-way streets are going to be coming at IUPUI,
             both New York and Michigan.  I think the west side has some
             real opportunities.  The east side could be some
             interesting play.  I was real involved in the Super Bowl
             Legacy project down there, and I think the east side
             continues to focus on single family home ownership, at
             least the near east side, more so than any multi-family
             housing to speak of, and that's a great thing and that's a
             tougher market and they are taking that on and I think
             that's good, but from an investor perspective and a
             developer perspective, the other sides of town.  And the
             near north side has always kind — not always, but in my
             career been strong and continues to be strong for any type
             of housing market.
                            OLSON:  Anything you are seeing, Brian,
             in terms of development in the building industry?
                            SULLIVAN:  I think there is one of the
             things that is really changing my world is just a change in
             methodology in contracting methods.  So a couple of
             legislative sessions ago a design-build was afforded public
             entity, so now K-12 are delivering more and more projects
             with a design build delivery.  This last legislative
             session, construction management at risk became available
             for public entities, notably higher ed who are — there are
             several projects lining up for that delivery.  And this is
             all owing to the scarcity of resources that all the public
             entities are facing.  So it will be interesting to see.
             You know, it is changing the historical relationships that
             existed with architects, engineers, contractors, insurance,
             finance, the whole spectrum.  And in addition to those two
             methods, P-3 which has been referenced related to the
             justice center, the world has expected the US to enter the
             P-3 arena for maybe ten years.  We have been slow to sort
             of get there.  Long Beach was delivered about two years ago
             and kind of a hybrid P-3 model, but everyone is looking at
             Indianapolis with the justice complex.  It is not for the
             faint-hearted.  It is a very complex transaction.  It will
             be very interesting to see how it plays out.  Of course
             there is political ramifications and all sorts of
             complexity attached to it.
                     And then I think — and another thing that
             certainly Joe has seen, a lot of the public entities,
             again, private and public higher ed have hooked at
             partnering with developers to satisfy some of their
             facility needs.  So these close working relationships with
             housing developers, commercial developers, so sort of off
             balance sheet transactions with some of the higher ed.  So
             this changing dynamic the way things get delivered is one
             of the interesting things I think in front of us.
                            OLSON:  Brian, for those who don't know,
             including myself, what is P-3?
                            SULLIVAN:  P-3, I'm sorry.  I can define
             that.  So P-3 is Public Private Partnership.  We have used
             that term a lot in the industry, but it has taken on a
             whole new level of meaning.  When you are sourcing
             privately $500 million, you know, the way these things get
             delivered there is entity three entities, there is an
             equity developer box, a design build box, and a facility
             management box.  These are 30 to 35 year transactions where
             there is obligations to this — to a consortium or a team
             of these three boxes to own, manage, finance, and operate
             the facility for 35 years.  So needless to say, they are
             papered up very extensively.  So that's it.  I mean it is
             private money pension funds and so on that are behind the
                            OLSON:  Quickly just following up on
             that last item, the whole P-3 idea, is that a wise idea
             financial engineering wise?
                            SULLIVAN:  Time will tell.  I think the
             jury is out. The jury is out.  You know, there is — as
             people see how complicated these things are, it will be
             interesting to see what the appetite is going forward.  In
             Canada, for instance, for 20 years virtually every social
             infrastructure project, vertical and horizontal, roads,
             bridges and vertical have been delivered this way.  So they
             have clearly adopted it as have the UK, South Africa,
             Australia.  So roads, bridges, but also hospitals, jails,
             government office buildings, those are categorically social
             infrastructure projects are all delivered that way if they
             are over $20 million.  So a lot of the world has adopted
             this.  It will be interesting to see.  Ask me in about a
                            OLSON:  Okay.  Moving on to retail,
             Jacque, and getting back to mixed use developments, I know
             those are going — leasing up well, retail space in several
             mixed use projects has been slow to lease up.  Is there any
             reason for that or what do you see going on there?
                            HAYNES:  How long do we have?  There is
             quite a bit that I believe is attributed to that and I am
             very passionate about retail and I think you have to
             understand two different types of tenants, whether you have
             your national tenants and credit tenants or you have your
             local what we refer to as our mom and pop tenants.  So the
             national tenants and the credit tenants continue to see
             A-plus, Grade A locations, Keystone at the Crossing,
             Hamilton Town Center, Anson, those areas that are really
             drawing the national tenants at this time.  When you look
             at the mixed use developments, those are more comparable to
             neighborhood retail centers.  Neighborhood retail fills up
             with your service-oriented retailers, so you will have
             boutique stores, you will have maybe medical use, you will
             have dental, you will have hair care services, dry cleaner,
             et cetera.  I think in the downtown area some of our
             challenges that we face, by example, Great Clips, they are
             a 12 to 1,400 square foot tenant, they require 400
             customers a week, on average those customer get their hair
             4.2 times, you know, they are going to recycle through.  So
             we had 1,400 units coming on delivery in 2014, one person
             from every one of those units would need to show up at
             Great Clips' door to make that store successful.  So that
             puts it a little bit more in perspective.  How often I hear
             from restaurants, you know, one office building or one
             apartment community does not make for a good restaurant.
             So I think that part of the challenge is we don't have the
             density yet, but it is coming.  I think that today we might
             see some turnover in the tenancy that occupies the
             buildings, but I think five years from now we are going to
             see that tenancy improve, we are going to see the credit of
             those tenants improve, and I think that if you could
             duplicate Mass Ave, that's the reason why Mass Ave is
             successful and some of the retail pockets that are
             separated from all of the synergies that a retailers wants
             is why it is more challenging.
                           OLSON:  Okay.  As a developer of some of
             those projects, Joe, is there anything you are seeing?
                            WHITSETT:  Yeah, I mean obviously
             location is so important for the retail piece.  You know,
             we are trying to do and urban development is trying to do
             mixed use with retail on the first floor.  We have been
             fortunate in our locations so far.  They are not completely
             filled up but we feel good about where we are with them.
             Most of us in our company try to underwrite our deals so
             that we don't need that rent from a commercial piece.  And
             we make less money doing that, but you have complete
             flexibility then with who you bring into that space.  We
             have one tenant that is going to be credit worthy that is
             bankable in terms of taking that lease and finance that
             with a bank.  The other two tenants that we have lined up
             so far for one of our deals, they are small operations
             which is exactly what we want.  We don't need the big
             retailer to come into our space.  We didn't underwrite it
             and sell it that way to our bank and to our investor.  I
             think that is key to have that flexibility because kind of
             what I — I grew up here and have always lived here, what I
             want in our buildings is what ends up being best for the
             city, which is strong retail, independently owned, not that
             it has to be, but I think the one national retailer on Mass
             Avenue, Starbuck's, I am not sure if there is another one,
             and that makes for a healthy environment, although
             obviously there is always turnover on Mass Avenue.
                            OLSON:  Who was the tenant you are
             talking about, which project?
                            WHITSETT:  We have at the Consolidated
             Building, which is 115 North Penn.  It is going to be
             called Penn Tower Apartments.  It is a 15-story vacant
             building, it has been vacant for a long time, between the
             BMO — just south of the BMO Harris Building that Senator
             Donnelly is moving his Indianapolis office to that space
             and then I think he reported the other day, a Hilton
             franchise is taking the back part of that seven-story annex
             behind us and they are taking the front piece, I don't know
             how many square feet, but about a third of that total
             space, for their lobby in the building that we have there.
             So that's a very positive thing for us.  Those are two
             strong tenants that are going to be able to pay their rent
             on time and are long-time tenants for sure, pending an
             election for Senator Donnelly, of course.
                            OLSON:  Jake, the next question is a
             topic we are exploring for an upcoming real estate section
             that runs September 22nd.  The industrial market has been
             hot for quite some time and now Amazon has announced that
             it has introduced same-day delivery to Indianapolis.  What
             can Indianapolis do to ensure it gets more than its share
             of these huge e-commerce distribution centers?
                            STURMAN:  First off, I want to thank the
             IBJ.  The JLL table got the VIP treatment to be able to
             leave first if they don't like what I say, way back in the
             back there.  So in any event, thanks everybody for being
             here.  The trend in e-commerce, first off, Indianapolis in
             general has had a big boom in e-commerce in the last five
             to ten years.  And, you know, the opportunity for same-day
             delivery since Indianapolis has four million square feet
             with Amazon here locally.  We were a test market and now we
             are a permanent market for Amazon.  Amazon is the clear
             leader for same-day delivery.  You know, as Scott and I
             talked about, there is other retailers testing that market,
             you know, from our perspective and will have some impact on
             real estate.  Here in Indianapolis probably not so much,
             you may see or may have read that Amazon is considering
             opening what they are calling sortation facilities across
             the countries, there is 15 of them going in, two of which
             have already been announced.  So those will be more
             same-day closer to a larger population and having
             opportunity to be in that 250,000 square feet to 400,000
             square feet versus like the Amazon buildings are over a
             million square feet each.  So, you know, the trend there is
             I think as Brian said earlier, time will tell whether or
             not it will work.  Amazon in any opinion is really out
             there in front of it to differentiate themselves from the
             brick and mortar.  As they get more and more pressure from
             FedEx, private carriers, to try to get closer to their
                     At the same point, we are seeing companies like
             Wal-Mart, Macy's, ToysRUs, they are also doing things like
             ship from store, I don't know if anybody has ever used that
             yet, but an opportunity to actually use their local retail
             store as a distribution mode.  So you will order a product,
             as long as the logistics of that product can either be
             shipped from a distribution point like a fulfillment center
             like we have here in Indianapolis or directly from the
             store.  So I think both of those trends will continue.  You
             know, same day for Indianapolis is huge because Amazon is
             here so if anybody else tries it, I think this would be a
             good test market even if they went up against the other
             opportunities here.
                            OLSON:  Following up on that, as same
             day becomes the standard, does a lot of our distribution
             stock become obsolete?
                            STURMAN:  Not necessarily.  I don't
             think anything over the newer product, '96 and newer has I
             don't think any risk at all.  You know, as an example,
             Amazon we all thought, you know and Duke is sitting down
             here I am sure chomping at the bit to fill their next
             center that is 36 foot clear.  The older facilities, and
             that's the clear height of a building, so from an
             opportunity perspective, Amazon went into a lower clear
             height building in Plainfield for their third distribution
             center, excuse me, their fourth, so they are going into
             some older facilities as well, so as much as we hope that
             is the trend and e-commerce, the better clear height would
             be as an example, they are at 40 foot clear
             and they are actually using mezzanine racking within that
             facility or mezzanine for their employees to actually be on
             and to create more space within the facility.  I think, you
             know, to go back to your initial question, same-day
             delivery I don't think is the trend necessarily, I think
             the — as long as you have a large enough footprint,
             cross-stock, and the biggest trend right now is probably
             auto parts for your employees.  We are seeing higher head
             count within the facilities all over the board as well as
             trailer parks.
                            OLSON:  Okay.
                            HAYNES:  I might piggy back on that.  As
             we know, the lines between retail and industrial continue
             to blur, but I just learned where Target is doing
             fulfillment centers in urban markets and are building a
             20,000 square foot store that is primarily there to accept
             the same-day delivery and hopefully then the consumer walks
             in, picks up sundries and other items, we are seeing that
             roll out in larger markets.  Hopefully that will eventually
             be the case here.
                            OLSON:  Lastly for you, Jacque, how does
             that affect retail leasing as e-commerce becomes more
                            HAYNES:  Did I jump on your question
             there?  I'm sorry.  Well, I think, again, the lines are
             blurred and I think we continue to see retailers adapt and,
             sure, their footprints may become a little smaller, but it
             isn't the death of retail.  So they're adapting or they are
             making fulfillment centers out of their retail — you know
             we are finding that when sales are ordered on line, if the
             consumer prefers to come in and pick it up then that's
             great because they are resulting in additional sales as
             they walk out the door.
                            OLSON:  The question for you, Brian,
             contractors in the skilled trades often struggle with
             attracting quality workers, coming out of an economic
             downtown, how difficult is it today it to find these
                            SULLIVAN:  Right.  Well, it is probably
             not a surprise to you and most of the folks in this room, I
             mean there is already a good deal of stress in skilled
             trades.  We were heading that way before September of '08
             when the financial markets locked down and shut everything
             down, so anyone who could age out, opt out in any manner
             from skilled trades have done so in the last fews, so then
             you all of a sudden ramp back up and we are starting to
             reach some level of normalcy again in construction activity
             and the problem has really been exacerbated.  So, yeah, it
             is real and it is going to create wage pressure.  So right
             now most folks in the related industries are doing what
             they can to induce young particularly high school folks to
             track into skilled trades where they can make a good living
             and backfill some of those positions, but that won't happen
             overnight.  There is a great deal of discussion around that
             right now.
                            OLSON:  Okay.  A quick reminder, as you
             think of questions of your own, please either write them
             down and pass them to an IBJ staff member or tweet them to
             me at Property Lines.  Getting back to the office market,
             Rich, we talked a little bit about the justice center.  If
             you can expand on that a little bit, certainly a
             contentious topic, what will it mean to downtown in terms
             of taking ancillary office space with it?
                            FORSLUND:  Vacancy.  But, you know, with
             that said, I mean it is one of those things where, as
             mentioned before, it is a question mark and no one knows
             exactly how this is going to fall out, but there is no
             doubt there will be a time where vacancy will show up, we
             will have to deal with that, but in regards to the
             opportunity where I was starting to go before was, you
             know, that area has always been sort of that east side,
             there has always been — there has been a Mason Dixon line,
             that far east side has sort of been cut off by the bail
             bondsman and some of these different utilizations within
             that area.  With those going away, I think a lot of things
             open up on that side of town. You know, we have already got
             some big wins over there in regards to Cummins, Flaherty,
             the Artistry, you know, there is a lot of light industrial
             let's call it, buildings over there that could be in the
             Cole Noble area which have a lot of adaptive reuse
             possibilities as well.  So, you know, take the example the
             Trinity Mines Building for instance, those guys did a
             really cool thing with that building and it is just
             something that I see that could continue on.
                     And then in regards to Delaware in particular, you
             know, we have recently done a couple deals over there, you
             know, the 136 North Delaware where the credit union,
             Indiana Credit Union has been forever, been vacant for a
             very long time, and because of this new news and because of
             things that people think are coming, you know, there is a
             group that is going to come in there and totally redevelop
             that building and you have seen the renderings probably, I
             think they were just put out there this week, but that will
             be really neat.  There is an architect art design, Indy
             Height bought the Barcelona tax building, did a lot of
             really neat things with that, it has been vacant for some
             time.  I think people are going to jump onto that and I
             think it is all — you know, if it does happen, I think it
             can be a very positive thing for that area.
                            OLSON:  Okay.  Sherry, has your
             organization taken any stand on the justice center or the
             proposal for a music venue?
                            SEIWERT:  I will say that we are
             delighted about the criminal justice center concept and we
             do hope that it goes forward.  I think that ultimately for
             downtown it will be great, and Rich just talked about the
             east side and the transformation that will happen.  I think
             about the former Market Square site with Larry Kahn's new
             development, the Cummins new development, the Artistry,
             that whole east side if the jails were to relocate I think
             would be completely transformed.  You have got the transit
             center that will break ground within that market east area
             as well as old city hall.  I think the music venue,
             proposed music venue still has a little ways to go.  There
             is some controversy amongst the neighborhoods and there is
             some discussions with White River State Park, but
             ultimately it would bring a proposed 300,000 people down to
             that area for a variety of music events as well as — and
             it would double the seat size from White River State Park,
             so ultimately I think it is going to be a great investment
             for downtown.
                            FORSLUND:  The other thing I mentioned
             real quick is in regards to the towers or let's just call
             it the Gold Building 251, that's good product.  So I know
             there is obviously people that are concerned and there will
             be winners and losers throughout this thing, but that is
             good product and it has a place.  The gold building in
             particular as far as my world is concerned, it is laid out
             extremely well and I just see it — you know, someone is
              going to pick that up and it is going to turn into
             something, you know, should this continue on.
                            OLSON:  Brian, with the justice center,
             she mentioned the transit center, what are some of the
             other projects that might be on the radar of contractors or
             are those the top two that you are looking at?
                            SULLIVAN:  You know, I mean it is kind
             of all sectors are actually starting to show life again to
             be perfectly honest.  Office, even though I am aware of the
             vacancy rates, I mean there are a number of known brands
             that are looking for new consolidated office buildings
             downtown.  Hospitality, you know, we are finishing several
             hotels now in Chicago and Bloomington, but also there are a
             number of projects proposed for Indy yet.  We are doing a
             22-story hotel in Denver right now, so the hospitality
             industry has been strong and one we recently expected Indy
             to play into that.  Mixed use, obviously notably anchored
             by the residential multi-family has been really
             transformative model that has hit the market place and
             there is more of that in our future.  You know, obviously
             the corrections justice center is going to create all kinds
             of tangential activity, the transit center is not
             theoretical, it is under construction, it is real.  Higher
             ed in and around Indy, every one of them have ambitions and
             projects on the boards, so there is sort of across all
             sectors, there is activity.  I didn't know if I would live
             long enough to say that, but it looks good.
                            OLSON:  Good.  Joe, you mentioned
             hospitality and you brought up your hotel for the
             Consolidated Building, can you tell folks how that deal
             came together?
                            WHITSETT:  The hotel specifically?
                            OLSON:  Yes.
                            WHITSETT:  One of our partners, Dennis
             Dye, it is like a lot of people in this room, it is about
             relationships and who have you known and who you have done
             business with before.  Dennis had the contact with Jeff
             Good of Good Hospitality out of Valparaiso and they have
             known each other for years and we knew that he and Dennis
             were looking for something to do in Indianapolis, he
             already operates some of the suites on South Meridian
             Street, so it was kind of a natural — well, it was natural
             for him to look at Indianapolis and for those of you who
             have ever been in the Consolidated Building since it closed
             or in the Annex, this guy has some vision because he walked
             into and said, yeah, this could be nice and it is really
             not very nice right now to say the least.  But, you know,
             it is a group like that who has a vision and who has the
             resources and frankly our willingness to say let's think
             about this, it wasn't what we thought would be back there
             when we bought the building, we didn't know what would end
             up in the annex, we thought it would be vacant and we would
             figure it out after we got done with our apartment
             redevelopment.  I am going to say it was a win for us to
             say the least.
                            OLSON:  Sure.  Lastly on hospitality,
             Sherry, with this project and the two hotels that are
             proposed across from Bankers Life Fieldhouse, is there
             anything specifically that's driving interest in downtown
             hospitality wise?
                            SEIWERT:  Well, Brian just told me that
             he had folks in this week and couldn't find rooms for them.
             I think we are not prepared to take on any large hotels but
             the boutique, smaller hotels certainly want a place in and
             around the downtown area.  I think it is just the explosion
             of the residential development that of course brings
             additional development with it.  So I think that we will
             hear about a couple more.
                            OLSON:  Good.  Staying downtown, Jacque,
             Circle Center will be 20 years old next year, is it
             starting to decline or what needs to be done to ensure its
             success for 20 more years?
                            HAYNES:  Well, obviously just my
             opinion, I don't think Simon has left me any messages
             asking for my thoughts on this, but I would say that, you
             know, from a structural component, you know, the mall is in
             good condition.  It is kind of a timeless, ageless,
             seamless mall.  I think they did a great job at Granite
             City creating an opening to the sidewalk and, you know,
             re-tenanting that and some of the upgrades they made for
             that.  I think that if I could think big and maybe spend
             their dime doing it, I would look at how could we
             incorporate more retail to the street level, and I realize
             there is physical components that make that challenging,
             let alone the financial side of it, but could we not have
             two-story retail, bring H&M down to the street level, bring
             Banana Republic to the street level.  I think if there is
             one thing that our mall streetscape misses is that.  You
             have a little tiny window opening over at Carson Prairie,
             and with the absence of Nordstrom, which a lot of retailers
             felt was on the wrong side of the street anyway, so I think
             you need to have that presence on Illinois, and if there is
             a way they could create that, it would be ideal.
                            OLSON:  Anything possible with the space
             that's available now in terms of creating some of that with
             what's vacant at Nordstrom?
                            HAYNES:  I think we will see a big
             change when Yardhouse comes along.  I will be anxious to
             see how those plans look.  You know, they are in serious
             discussions with Dinosaur Barbeque and I have visions of a
             giant dinosaur head coming out the mall.  Maybe they will
             just take the one from Children's Museum and move it a few
             blocks south.  I think that's going to create a good
             streetscape and, you know, and that's what retail needs.  I
             mean that — Bill French and I are on a bent all the time
             about let's let retail look like retail.  And so if we
             could create that along the mall, it would be good.
                            OLSON:  All right.  Switching gears to
             industrial, Jake, is the area around Plainfield still the
             leader in luring industrial projects or what are some of
             the new areas around the city that are starting to emerge?
                            STURMAN:  Sure.  Plainfield and the I-70
             corridor I think carries a national brand now, you know,
             much the same as maybe the Inland Empire, I-80 in Chicago
             or Great Southwest in Dallas.  So what that does for our
             local community is it brings other institutional investors
             that are looking to the Midwest to invest dollars here, so
             you will see or you have seen a boom in speculative
             development both in Plainfield and all around central
             Indiana.  So from a Plainfield versus the other markets, it
             is I think a safe choice for a developer first and then
             because of the critical mass for the last 10 or 15 years,
             it is a safe choice for a tenant.  And most of the demand
             in Plainfield is third party logistic firms.  So as you
             create a campus like Osborne Hussey Logistics is an
             example, it is an easy choice to grow your business there
             and if developers have built space, you tend to stay around
             where your current employee head count is.  So I think
             Plainfield has done great, I think there is great things to
             come as both All Points Midwest gets built out and the West
             Point area continues to go. As far as emerging markets or
             other markets that we have seen demand, Greenwood has a
             speculative development building under construction with
             Quadrangle.  You know, there is other markets that we have
             never seen spec, maybe prelease early, you know, five or
             ten years ago in Lebanon with GDI and North Point doing a
             750,000 square foot facility up there, so I think all of
             the markets are ripe for development.  Tenant demands are a
             little bit off this year, but I think as we approach the
             fourth quarter we will see some of these fill.  And lastly,
             the only area that we haven't seen spec or maybe emerging
             market to keep your eye on is the east side.  You know, as
             an opportunity for Mount Comfort to continue to grow and
             then why those all make sense is we have seen a little bit
             of a labor discussion enter Plainfield in the southwest sub
             market, so as a case in point, Ulta really didn't want to
             be in Plainfield at the end of the day, they chose
             Greenwood and it was between Mount Comfort and Greenwood
             and most of that was labor driven versus development
                            OLSON:  Okay.  Joe, we are getting a lot
             of interest from the audience on the multi-family area.  So
             I will throw this one out to you:  Do design relatively
             inexpensive materials used in current multi-family projects
             especially downtown make those property viable long-term?
                            WHITSETT:  Who asked that question?
             Well, I will just say as a downtown developer, and like I
             said before, I have lived here all my life, I think we have
             to have a quality design, quality product inside and out.
             It is as much about the apartments and the quality of
             what's in those apartments, everything from the appliances
             to the paint to the counter.  You just can't slap down
             granite counter tops and say this is a great apartment
             anymore, and you shouldn't.  It is not good for your
             investment.  I wonder if I am right about that in that
             there are projects in town I will say that I don't think
             are of the highest quality material and I don't know that
             they will sell those for any less than we will sell ours
             for, and that doesn't have to be the test.  There is
             another test which is what's better for the community,
             what's better in the long term, or hold the property
             yourself and not sell it.  We have historically been and
             want to be a long-term holder of real estate and of
             apartments.  That's not always going to be the case. We
             have at least one investor who is not wanting to be and
             will not be a long-term holder so if we can't buy them out
             we will probably sell one of our developments at some point
             in time in the future.
                     But in the meantime, there is no reason to not
             spend additional money to make it a higher quality product.
             That's my personal view and I will just say I don't know
             who it is that they are talking about or at least I am not
             sure I do.
                            OLSON:  That was our next question.  On
             the contracting side, Brian, how does that affect you guys
             in terms of when you come into a project material wise?
                            SULLIVAN:  I'm probably not going to
             have a long answer on this one.  I mean clearly it is okay
             to have this conversation, I think we just — we are
             finishing Iron Works up at Keystone at the Crossing and I
             think it is a really good example of good design, good
             materials, you know, an owner who clearly is building for a
             long-term hold.  So, you know, obviously I value that and I
             hope we all do.  If we all value that then the right
             decision is being made, I will leave that answer to stand.
                            OLSON:  Another quick reminder, as you
             think of questions of your own, please either write them
             down and pass them to an IBJ staff member or tweet them to
             me at Property Lines.  Rich, getting back to the vacancy
             issue downtown, we talked a little bit about technology
             firms moving downtown but they generally prefer older
             buildings with a certain character such as the Century or
             Gibson buildings.  I know you hit on this a little bit
             earlier, but do Class A office towers have a shot at
             getting these kinds of tenants?
                            FORSLUND:  They do.  They do.  I think
             it is just a matter of what's happening right now and we
             were in a meeting yesterday internally and sort of had this
             conversation, but it seems that the office world is
             basically becoming more retail than ever, if that makes
             sense.  You know, merchandising is a really big deal and
             the product is a really big deal, a lot of that is
             basically stemming from groups, tenants, companies, looking
             to create a culture or basically, you know, they are trying
             to create a culture and they need their real estate to help
             them do that.  You know, as far as the towers are
             concerned, there is groups doing it.  In the big cities it
             is already happening and it is going to have to happen here
             soon because we simply don't have that many loft type
             buildings, et cetera.  So, again, it is just a matter of
             getting in.  I know there is a couple groups that are
             looking at, for instance, Regions Tower and Market Tower,
             in conversations with those guys, you know, the status quo
             in regards to the way those are set up, the lobbies, et
             cetera, it is going to change.  And, again, what is it
             going to change to?  There is a lot of ways to tackle this
             but it is basically that Starbuck's.  You know, it is
             creating that vibe or that pulse within that plaza type
             feeling in those common areas.  That's what people are
             looking for.  They are trying to create more than a place
             to just walk from outside to inside to their office.  And
             so, yeah, I think there is not going to be a problem
             overall in the long term, again, it is just reacting to
             what people are looking to buy right now.
                            OLSON:  Okay.  On the other side I have
             got Joe with the mixed-use projects, we talked about retail
             not leasing up, is office good for mixed-use projects?  Are
             you seeing some interest in office users?
                            WHITSETT:  No, not really.  We have had
             some people approach us about could we buy your building
             that we were going to convert to apartments and the answer
             has always been no because it is either no because we want
             to do it or no because they don't want to pay the right
             amount, but either way it is a no.  You know, I feel like a
             solution on the office side or at least part could be
             converting some of the — more vacant buildings to housing
             than we are doing right now.  When we bought 333 Penn, the
             American building, it was an office building that was
             probably 45 percent occupied and it was actually with
             Ossip, Ambrose Property Group where they had worked with
             the existing tenants on really an exit pattern or exit plan
             for them.  That can be done.  Again, I prefer it to be in
             historic buildings, unfortunately that's where the young
             entrepreneurs want to have their offices also.  There is a
             way to make this work to get more people downtown in
             existing buildings, lower the vacancy rate, have the
             residents go more vertical than spread out in a four-story
             building with retail on the first floor which is what we
             are seeing a lot of still.  I would rather see the
             residents in 15-story buildings or 18-story buildings, even
             if there is some office mixed in it.
                            OLSON:  Okay.
                            FORSLUND:  I would note, too, the other
             thing to consider in thinking about the towers is no matter
             how much someone is looking to go the loft or look for that
             really creative building for their company, there comes a
             time and size better yet where that's not possible.  You
             know, efficiencies of these towers, the way these are set
             up, the amount of square footage you can stack into them
             and be an efficient user, you can't find that within a
             loft, so there is always going to be a life for these.
                            OLSON:  Okay.  Jacque, we talked a
             little bit about Circle Center; moving east, Simon
             relinquished ownership of Washington Square Mall.  What
             could a new owner do to turn around that property?
                            HAYNES:  I think in malls like
             Washington Square we are seeing across the country
             redevelopment trends within them and, you know, listening
             to Mike, one great thing would be add a trade school.  That
             area needs an employment base to sustain it, I think if
             there is a way that we could add a trade school, that would
             be very helpful.  Look at medical uses, alternative retail
             uses, I think those are the things that we will see and
             redevelop a mall like that.  As far as the east side goes,
             HH Gregg is relocating and taking a bigger footprint.  I
             recently backfilled a Panera that vacated because the store
             no longer fit their footprint on East Washington Street,
             but before they were out of the space, we had retenanted
             the space with Vision Works.  So I think the market is
             still very viable.  I think that, you know, but they are
             going to need a community based — something that draws the
             people in whether it is grocery, whether it is education,
             whether it is medical, but it is going to take that kind of
             service within it because I don't know that you are going
             to find a significant amount of retailers that will invest
             into the mall.  If they could, again, figure out how to
             turn the mall inside out, that would be very helpful.
                            OLSON:  What do you think the interest
             might be in owning that property?
                            HAYNES:  I think we will see interest.
             I think there is always an entrepreneur out there that
             seizes that as an opportunity.  You know, at some point
             there will be a price point that it makes sense.  It will
             be an opportunity to reset the basis so that the next owner
             can come in and spend the money needed for the
             redevelopment side of it.  But I think, again, you have to
             look at the economics in that particular part of the trade
             area and what can you do that can improve jobs, that can
             improve the ability to have consumers shop.  I mean one
             thing again nationally that we are seeing is kind of the
             lack of the middle class consumer and if anything, that
             area has probably been hit the hardest by that, so it
             really is pushing either trends towards severe discount or
             luxury on the high end and you have to find a way to turn
             that around in that location so you can bring that consumer
             back in.  And as Greenfield becomes more developed, that is
             going to put even a little more pressure on Washington
             Square area because the Greenfield residents will have
             choices in their own market.  So I think that it can be
             done, I think for the right price, and I think somebody
             will be creative enough to make that work.
                            OLSON:  Okay.  Sherry, you talked a
             little bit, hit on old city hall earlier, what are the
             chances of that attracting a major reuse and what might
             make the most sense for that building?
                            SEIWERT:  Well, it is a beautiful
             building and it — but it has this huge atrium, so you need
             to think about what the appropriate reuse is.  I know that
             the City has received a number of possible reuses, and I
             think they are still looking at a few but, you know, it is
             going to be — it is getting harder to find.  I think it
             will be a mixed reuse.  I don't think it will just be one
             taker, how is that?
                            OLSON:  Okay.  Following up on that
             theme of reuse, a question from the audience, if IU Health
             builds a new flagship hospital or consolidates on the IUPUI
             campus, what is the potential for reuse of the old
             Methodist Hospital campus?  Anybody have an opinion on
                            SEIWERT:  Joe is like the king of reuse
             buildings, you probably ought to ask him.
                            WHITSETT:  You know, I think back and I
             try to think of the last successful reuse of a major
             hospital building.  It is really hard to think of.
             St. Vincent got reused for awhile as public housing, I
             think, or Section 8 housing.  It was Section 8, not public.
             And then, Brian, your company tore all of it down except
             for the front of it and made it a use that actually worked
             because those are very difficult to figure out how to use.
             St. Francis Hospital in Beech Grove has been vacant for
             over a year now and they are working on a use and working
             with people on a use but I am not sure it is going to
             happen.  The reuse of the land at Methodist Hospital, I
             haven't thought about this before recently and it is an
             easier thing to figure out than reuse of the hospital
             except for maybe Brian.
                            SULLIVAN:  Since my partners and I own
             the property across the street, in a big way I am very
             interested in any ideas that folks have out there.  But,
             you know, one of the realities is IU Health has invested
             very significantly right across the street in their
             neuroscience complex so it is not all together crazy to
             think that it will remain an important asset and attract
             other health-related uses.
                           FORSLUND:  We use — this is years back,
             but we marketed the old Winona Hospital and we see where
             that went.  So, you know, the issue with the hospitals and
             when you are dealing with those, the depths within those
             and the shear size of them, you know, people like window
             space and those aren't exactly set up for that, you know,
             in regards to office or pretty much anything across the
             board when you are looking at multi-family, et cetera.  So
             those are tough.
                            STURMAN:  Maybe the jail.  Just a joke.
                            OLSON:  Jake —
                            SULLIVAN:  I read about it in the IBJ.
                            OLSON:  — an industrial related
             question for you.  Obviously the local office market is
             seeing outside interests, how much are we seeing outside —
             how much outside interest are we seeing in the industrial
                            STURMAN:  I think there is more buyers
             than sellers right now.  We are seeing an influx of capital
             like we have never seen before, I mean pre downturn buyers,
             portfolios that either have already closed and outside
             investment and parks that maybe saw significant vacancy
             that have since been backfilled.  We have seen groups like
             Cross Lake enter the market, Exeter Property Group in a big
             way come in our market and so that the capital side of the
             business is I think pretty efficient right now and sellers,
             it is a good time to sell portfolios.  And where I don't
             think the fundamentals are out of whack, most of the price
             per square foot of the sales that we are seeing both on the
             institutional bulk industrial side and the portfolios, you
             know, the cap rates seem low, but we always look at the
             price per square foot and that's comparison replacement
             cost and as that lease rolls whether it is a long-term
             single tenant or the portfolio sales.  Back to your initial
             question, there is a number of buyers from out of town
             looking here, and then you have also got local buyers that
             are looking at the portfolios either with joint venture
             partners from out of town, so we have great local operators
             that are bringing institutional money into the market as
                            OLSON:  Okay.  We have got time for a
             few more questions.  Joe, this is what I had for you and an
             audience member also submitted it.  Obviously a lot of
             activity going on downtown multi-family wise, always the
             question of a saturation point; what do you see there?
                            WHITSETT:  You know, we watch that
             closely.  I know every multi-family developer who is
             working downtown, there are a lot of them in the room I
             see, I know they watch closely also.  I actually E-mailed a
             couple people in our office last night and said what is our
             company line on this question, and it was the same as what
             I was going to say anyway, I think Midwest Real Estate
             News, whoever reads that, had an article recently about
             downtown, the housing boom, multi-family, and is it going
             to end and they said no chance, not soon, and of course it
             will some day.  They barely mentioned Indianapolis.  It was
             Minneapolis, St. Louis, Cleveland, other cities and we are
             ahead of most of those.  I would say we are behind
             Minneapolis in downtown multi-family redevelopment in terms
             of just how many have been built.  We're in the middle of
             the pack of that.  I would say we have a better downtown
             than almost all of those cities in terms of other amenities
             thanks to groups like Downtown, Inc. and people who were
             here long before us in downtown redevelopment.  And so I
             don't see an end to it soon.  We on our most recent
             property released, we beat our pro forma rents by seven
             percent.  We would like to believe that that's bringing in
             more retailers who will, you know, you do need the
             households to get the retailers in and the restaurants in
             and it seems to be working.  And when you get those, I mean
             whoever goes downtown, goes out to eat downtown on the
             weekends, it is hard to get in and that's a good sign.
             There are a lot of really good — we were talking at
             breakfast, there are a lot of really good restaurants
             downtown to choose from, now more than there used to be,
             which are going to bring more people downtown.  So we don't
             see an end to it in the short term, but I have lived
             through enough recessions and ups and downs to know that
             the housing market isn't dead forever, and there are young
             people who are going to turn 30, 35, have kids and say, you
             know, unfortunately they are still going to say what school
             system do I want my kids in if I can't afford a private
             school and, you know, we always come back to is IPS the
             perfect school system for what we need to really keep the
             excitement about downtown housing.
                            OLSON:  Any other input from the panel?
                            SULLIVAN:  This is a global trend, look
             at people all over the world are moving to urban centers,
             so we are seeing the results, the pressures from that.  I
             am kind of surprised and maybe disappointed even that we
             don't talk about mass transit anymore in a venue like this.
                            WHITSETT:  The white flag is up.
                            SULLIVAN:  The white flag is up?  Well,
             it gets apt to everything that we have talked about here
             whether it is pressure on office parking ratios or getting
             employees to employers.  The proof of concept has been
             strong in transit-oriented development with something as
             simple as the cultural trails, you know, and bike share.
             Look at how many developers are valuing that, locating on
             or near it and advocating it, promoting that as one of the
             first things about their properties.  I think that's one of
             the things that we need to sort of make sure it gets back
             up on the priority list in our conversations.
                            FORSLUND:  It is a constant
             conversation.  One of the things as far as demand and, you
             know, why folks are coming in and looking at Indy.  There
             is obviously a lot of reasons they are showing up, but when
             they are here, what is interesting is the feedback that we
             get. The connectivity, the bike share, you know, basically
             the progressive nature of where our city is going is really
             helping us.  You know, electric car share, Cultural Trail,
             bike sharing.  We were just talking at breakfast, what was
             that number?
                            SEIWERT:  68,000.
                            FORSLUND:  68,000 bike share riders in
             the how many?
                            SEIWERT:  Four months.
                            SULLIVAN:  We are negotiating six new
             stations right now and we are constantly pressured by chair
             of the boards of those two organizations who are under a
             lot of pressure to create sort of Cultural Trail lights to
             reach out into the next tier neighborhoods.  So it is
             great, but we need to do more on the transportation?
                            HAYNES:  It goes to the success of the
             retail, too, that's greatly aided that.
                            FORSLUND:  If you look at Fountain
             Square in particular, it is more of a retail push, right?
             But that Cultural Trail showed up and suddenly that's the
             spot, right?  It has been discussed forever as the next
             Broadripple, as the next Mass Ave but it wasn't happening.
             As Soon as that trail showed up, maybe it was just
             happenstance, but certainly it was good timing.
                            OLSON:  We will end on this note, we
             will just go down the line.  Quickly, what advice would you
             give to somebody getting into your business?
                            FORSLUND:  Into my business?  Be
             patient.  Getting into my business?  You know, be ready to
             think.  I think, you know, with everything that's taking
             place right now, you know, sort of the commodity discussion
             of price is disappearing, at least in the office world, and
             it is really becoming something where it is not just always
             how much I am paying but whether what else it is doing for
             me, and so thinking and being able to think in those terms,
             I think puts you in a different place.
                            HAYNES:  Be creative.  I think you have
             to look for solutions that are outside of the box, and we
             hear that term all the time so not to make light of it, but
             it is very necessary.  So be creative, don't let barriers
             stand in your way and don't let the fact that someone said,
             oh, that won't work.  That's all the more reason it should.
                            SEIWERT:  Well, there is only one
             Downtown Association so you can't have my job, but if you
             were, that you we are an authentic urban area, which is
             great and there are a lot of other suburban areas trying to
             create the same thing, but we still compete with other
             cities so we have to be open to change.  We can no longer
             be a nine to five, you know, downtown office space.  We
             really need to be a 24/7 multi-dimensional neighborhood and
             be thinking about how we create active space and a lot more
             related to our downtown.
                            STURMAN:  Be specialized on something
             that you are good at or really care about and be passionate
             about that specialization within brokerage.  But also keep
             your eyes open about all the other disciplines out there.
             I am working on other types of projects with specialists in
             our office.  And then Mike Hurless told me, if you can go
             to dental school, go to dental school, don't get in real
                            SULLIVAN:  So I would say be adaptable.
             I mean you can't fall in love with one sector.  So if it is
             hospitality, for instance, and you say by golly we are the
             best builder of hotels in the world and then nobody is
             building a hotel then you have problems.  So you have to be
             adaptable.  And in those areas where you feel like there is
             market potential, short-term, mid-term, long-term, you
             better develop some expertise.  You need to be able to sit
             down with an owner and understand their pro forma almost as
             well as they do so you are dealing with the same challenges
             in the right way.
                            WHITSETT:  Well, it harkens back to one
             of the questions for me, go ahead and spend the money to
             deliver a high-quality project now.  You will either get
             that money back or you will at least retain the value so
             much more than if you cut corners and try to deliver a
             product of lesser value to the community or to your
             company.  I just think that's the right way to go.


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