Ambrose Property Group, the new owner of a mostly vacant five-building office complex at 500 N. Meridian St., has scored a coup by snagging a trio of big tenants from downtown's OneAmerica Tower.
Law firm Hall Render Killian Heath & Lyman PC, accounting firm Blue & Co. LLC and the Indiana Hospital Association plan to vacate the 36-story OneAmerica Tower at the end of this year.
The three occupy nearly six floors totaling more than 101,000 square feet, or roughly 15 percent of the 691,769-square-foot building. On top of that, Cummins Inc. plans to give up its floor in the fall of 2016 to move into a new global distribution headquarters to be built on a vacant lot at Alabama and Washington streets on the east side of downtown.
Despite the pending vacancies, Jon Owens, a DTZ office broker and leasing agent for the OneAmerica Tower, is upbeat about the building’s prognosis.
“It’s such a good property,” Owens said. “If there’s a firm out there that wants to potentially upgrade its image, this building would certainly be on the list.”
The OneAmerica Tower, which bears the name of its life insurer owner, was built in 1982 and is fully occupied. It’s the second-largest building downtown, trailing only Chase Tower.
Ambrose Property Group in June closed on the $12 million purchase of 500 N. Meridian, which included 436,000 square feet of office space and an adjacent parking garage. Ambrose co-owner Aasif Bade confirmed the tenants were relocating to his building but declined further comment.
Hall Render will lease the second, third and fourth floors of the main, seven-story building. It will sublease the second floor to Blue & Co. and the hospital association, bringing occupancy of the main building to about 75 percent. Other tenants include Harrison College and Hoosier Oncology.
Real estate brokers familiar with the deal said economics likely played a large part in their decision to leave the OneAmerica Tower. The asking lease rate at OneAmerica is $24.50 per square foot, compared with $19 per square foot at 500 N. Meridian.
“Once they got a flavor of what their rent could be there,” Owens said of the three, “there was almost no conversation on renewing.”
But leaders of Hall Render and the hospital association say it’s more than that. The move allows the law firm to be on just two floors, rather than the five it occupied at OneAmerica, said Hall Render’s managing partner, John Ryan.
“Our build-out [at OneAmerica] has been pretty piecemeal, so we’ve ended up with pretty inefficient space,” he said. “This brings all of our attorneys closer together.”
Hall Render’s space actually will be about 6,000 square feet smaller than the 74,000 square feet it leases at OneAmerica, Ryan said.
For the hospital association, the move enables all of its employees to have onsite parking, President Doug Leonard said. At OneAmerica, not enough spaces are available in the underground parking garage to accommodate every tenant’s employees.
A new café, conference center and fitness center in the works for 500 N. Meridian also were attractive amenities, Ryan and Leonard said.
Hall Render, the hospital association and Blue & Co. enjoy a close working relationship and have called the OneAmerica Tower home since the mid-1980s.
Hall Render, one of the largest health care law firms in the country, is a big client of Blue & Co., which provides services for hospitals and health care providers. Hall Render provides legal services for the Indiana Hospital Association.
With 99 lawyers, Hall Render is the fourth-largest law firm in the city, according to the most recent IBJ statistics. Besides Indiana, it has offices in Colorado, Kentucky, Michigan, Pennsylvania, Wisconsin and Washington, D.C. Blue & Co. has eight locations in Indiana, Kentucky and Ohio, and is the eighth-largest accounting firm in the city, based on number of employees.
Meanwhile, 500 N. Meridian has been mostly vacant since Seattle-based insurance giant Safeco Corp. left in 2009 as part of its acquisition by Boston-based Liberty Mutual.
The sale of 500 N. Meridian followed Ambrose’s purchase in late December 2013 of the 12-story, 315,000-square-foot Landmark Center at 1099 N. Meridian St. for $8 million. The firm quickly signed Angie’s List and the Christian Church-Disciples of Christ, which took occupancy from less than half to more than 90 percent.
Between the two properties, Ambrose is spending about $12 million on improvements.
OneAmerica’s loss of three tenants comes at a time when downtown buildings, particularly the traditional towers, are struggling to attract tenants. The central business district’s vacancy rate is hovering around 20 percent with no signs of relief. Downtown ended 2014 with a negative absorption rate of nearly 170,000 square feet.
“It’s going to be a blow, at least initially, for the Class A vacancy rate,” Owens said of their departures. “But with all the housing being built downtown, at some point the employers are going to figure out that they need to have a presence downtown.”