A Kansas City, Missouri-based real estate firm plans to spend $5 million to improve occupancy at two downtown office towers it just purchased out of foreclosure.
Mission Peak Capital in June closed on the sale of the buildings located within a block of one another that were placed in receivership in 2014 after their owner defaulted on a $28.5 million loan.
Market Square Center at 151 N. Delaware St., commonly known as the “Gold Building,” and Two Market Square at 251 E. Ohio St., were owned by Santa Monica, California-based Hertz Investment Group.
HSBC Bank USA National Association filed to foreclose on the properties and sold them last month to Mission Peak Capital, which considered redeveloping the buildings into apartments to take advantage of downtown’s strong residential market.
“We looked at alternate uses as well, but we’ve come to the conclusion that we’re going to keep them as office buildings,” said Chris Dunn, a Mission Park partner. “We have good tenants.”
Occupancy at both buildings is hovering in the mid-60 percent range, Dunn said.
With about 420,500 square feet, the 20-story Gold Building ranks as downtown’s 10th-largest office complex. It was constructed in 1975. One of its biggest tenants is the Marion County Public Defender Agency.
Two Market Square totals nearly 215,000 square feet, ranking it as downtown’s 16th-largest office complex. Its major tenants include the Marion County Prosecutor’s Office, which occupies 77,600 square feet, and First American Title. It was built in 1985.
Dunn declined to divulge how much Mission Peak paid for the two buildings and an accompanying parking garage between them. The transaction has yet to show up on Marion County assessor records.
The records, however, show in July 2015, when HSBC Bank wrestled control of the properties from Hertz, that Hertz still owed $25.1 million on a $28.5 million loan it received in 2006.
Meanwhile, Mission Peak is beginning to make building improvements ranging from elevator upgrades to lobby makeovers, said Dunn, who foresees the properties as long-term investments.
“If an opportunity would present itself, we’d look at it,” he said. “But it’s not like we have a prescribed plan there. It would behoove us to hold it and let that area mature.”
The buildings, immediately north of the City-County Building and historic City Market, are situated in an up-and-coming area of downtown known as East Market District.
Flaherty & Collins Properties’ $121 million, 28-story 360 Market mixed-used development, to be anchored by a Whole Foods specialty grocery, and Cummins Inc.’s $30 million global distribution business headquarters, are both under construction barely a tee shot away.
Mission Peak hired Cushman & Wakefield’s Jon Owens and Megan Drudy as leasing agents. The two already are fielding calls from companies interested in the space, Owens said.
“We’re getting inquiries from companies that want to be close to the Cummins headquarters,” Owens said. “You put, on top of that, the Flaherty & Collins apartment project, and these buildings are right in the mix.”
Mission Peak’s purchase of the properties marks their entrance into the Indianapolis market. Founded in 2008, the firm’s investments typically range from $5 million to $50 million and focus on office, retail, hospitality and mixed-use properties.