What’s next for the two city blocks that are now Circle Centre mall could start coming into focus over the next year.
Circle Centre Development Co.—which owns much of the mall, though not the land underneath it—announced this week that it has asked five design groups to submit ideas for reimagining the space in the core of downtown.
The firm said it’s also looking to partner with a developer for what will likely be a massive revamp of the 1-million-square-foot campus.
Circle Centre Development, which has 17 owners, all companies with some ties to Indianapolis, is keeping mum about precisely what it has asked the design groups to do, how much it might be willing to spend on the project, and how much of the mall structure might remain in a revamp.
But experts say it’s been clear for a while that the mall—opened in 1995—doesn’t serve the needs of today’s consumers and that a successful revamp must include broader uses, which would likely include housing.
“The ownership group has had ongoing conversations for several years, as it relates to potential redevelopment options for the mall,” said Adam Collins, an attorney who represents the ownership group. “The pandemic just made it simpler for everybody to decide that now is the time to really focus on those redevelopment efforts.”
The owners’ move to seek ideas for the space comes after Indianapolis-based Simon Property Group Inc., one of the original mall investors and until recently manager of the space, sold its 15% share to the remaining owners late last year. Through Collins, a partner at Indianapolis firm Wallack Somers & Haas, the remaining owners said the sale helped clear the decks for rethinking the space.
Collins said the reimagining process is still in early stages, with the ownership team set to examine ideas through the end of the year. Final decisions will be dependent on securing a development partner, he said.
“The plan is to have a separate development partner who has significant experience in both adaptive reuse and in structures similar to the mall come in and be a part of that process,” Collins said.
“The timeline will be driven by the participation we get,” he said. “But the ownership group is focused on seeing Circle Centre transition as quickly as possible. Some of that will be determined by, ultimately, what the market tells us.”
The mall’s ownership and structure are complicated, the result of a public-private partnership that got the project built after years of problems.
Former Mayor Bill Hudnut and his successor, Mayor Steve Goldsmith, crafted the deal that led more than a dozen Indianapolis companies, including Simon, to invest in the mall.
The number of companies swelled to 20 shortly before the mall opened, with the group contributing about $75 million to the project. Today, 17 businesses are involved in the ownership group, but it’s not clear how many are original owners.
The mall was developed by fusing a number of existing buildings and facades with new structures. Circle Centre Development owns many of the buildings, including all the sections built specifically for the mall.
But the land is owned by the city and leased to the ownership group through an agreement with the Department of Metropolitan Development. In addition, the city owns the northeastern-most building in the complex, where Carsons was located, and has leased it to Circle Centre Development through a separate agreement.
Some spaces, like the buildings that house St. Elmo Steakhouse and the Le Meridien hotel, are owned by their respective parent companies. The city also owns the parking garages at Circle Centre; they are managed by locally based Denison Parking.
Because the city owns the land and helped underwrite more than half of the original project, it has a vested interest in its redevelopment. But it has little control, outside the normal zoning and design approvals needed for any downtown project. The ownership structure and property agreements give Circle Centre Development extensive leeway in determining how the buildings are used.
Even so, Collins acknowledged the city will play a significant role in repositioning the mall. That role will likely include another investment, probably funded through revenue from the city’s downtown tax-increment-financing district.
Portia Bailey-Bernard, vice president of Indianapolis economic development at the Indy Chamber, said that, while the city is taking a back seat to Circle Centre Development on plans, the Hogsett administration still is likely to advocate for a residential component to the project.
That’s also likely to include a demand for supportive retail and additional amenities—making for a project Bailey-Bernard said is likely different from what it would have been before the pandemic, which perhaps would have included a stronger focus on office space.
“With the shortage we’ve seen in our housing supply, we can’t have enough residential in our downtown space,” she said. “And so my conversations with the city and [Department of Metropolitan Development] are in support of more residential in our downtown core.”
Plenty of ideas
Community leaders have been privately—and sometimes publicly—debating and brainstorming ideas for the mall space for more than a decade, since Nordstrom in 2011 became the first of two anchors to leave. Over the years, more stores followed, but the biggest blow came in 2018 when Carsons left, leaving 145,000 square feet empty.
Since then, Simon has worked to find new uses for the mall spaces—both inside and outside. The Indianapolis Star moved into the Nordstrom space. A coworking space is headed for a first-floor former restaurant spot. A technical college taught classes for a while on the fourth floor. And many more restaurants and bars now ring the outside of the buildings.
But the Carson space has proven especially difficult to fill. It remains vacant.
Ideas for mall reuse have ranged from smaller renovations to create new office and entertainment spaces, to large-scale revamps that include the demolition of large sections of the mall to make way for high-rise multifamily properties, hotels and other commercial uses.
John Talbott, director of the Center for Education and Research in Retailing at the Indiana University Kelley School of Business, said tearing down part of the structure is complicated by the existing restaurants and parking garages, the latter of which are expensive to build.
But Talbott added there are opportunities for another downtown grocery to take over part of the mall, or maybe one of the new brick-and-mortar Amazon stores, as well as apartments and offices.
“They really could make it a mixed-use experience center that can fit into the downtown area,” he said. “This is a place that, with a bit of adaption and creativity and some capital, can be redeployed for this particular decade and the upcoming ones.”
Sherry Seiwert, president of Downtown Indy Inc., said the property presents a “great real estate opportunity” in downtown’s core, particularly if the ground-floor retail can be salvaged while upper floors are repurposed. But she said razing part of the property—probably the southern portion, between Maryland and Georgia streets, which was purpose-built for Circle Centre—could also work.
“There’s so many assets that exist there that I don’t think we will have difficulty finding reuses [for],” she said.
Mayor Joe Hogsett’s chief of staff, Taylor Schaffer, said the owners should expect plenty of options from the participating design firms, which include local and out-of-state organizations.
The groups pitching ideas include:
◗ a partnership of Indianapolis-based firms Ratio Design and Meticulous Design + Architecture;
◗ Indianapolis-based CSO;
◗ a partnership of Indianapolis-based Woolpert and Miami-based Arquitectonica;
◗ Fort Lauderdale, Florida-based Dorsky + Yue International Architecture; and
◗ the Ball State University College of Architecture and Planning, in Muncie.
“I think it’s notable that the development group’s initial step was to bring on a variety of architecture firms, some local and some with experience here and to imagine what the footprint could look like,” Schaffer said. “I think that is probably indicative of where they are in terms of really reimagining that space.”
Collins said the owners are allowing the designers to take the lead, but noted that the facility’s operations would need to be “financially sustainable,” regardless of what direction they take.
Even so, he said, the owners “are actively looking at potential redevelopment that will provide a continued catalytic and transformative effect on downtown Indianapolis.”
The recent withdrawal of Simon, which was a driving force behind the mall’s development, was “a mutual decision made by the owners to benefit Circle Center Development Co.,” Collins said. He declined to elaborate about who proposed that the company step aside or how much Simon was compensated.
Simon did not respond to emailed questions about its decision to leave the ownership group.
At the time called Melvin Simon and Associates, Simon developed the mall and managed the property until last April, when it handed the reins to the Indianapolis office of Chicago-based JLL.
Mike Wells, president of Carmel-based REI Real Estate Services, said he wasn’t alarmed or surprised to hear about Simon’s exit. The mall has historically underperformed compared to the rest of the company’s portfolio, Wells said, noting that a change from a mall to something else might not have been a direction in which Simon had interest.
He said the change is a “good thing,” and that he hopes it’s a sign the ownership group is “trying to understand what the market is looking for.”
Wells said that, because mall ownership might still consist of corporations with ties to Indianapolis—the original group included the Eli Lilly and Co. retirement fund, the parent of Indianapolis Power & Light (now AES Indiana), Lacy Diversified Industries Ltd. and several locally based insurance and banking institutions that have since been gobbled up by larger companies—they might feel more of a sense of local corporate citizenship than Simon, which manages properties all over the world.
The remaining owners will “now be able to control their own fate and decide … exactly what they want to try to do and how they want to invest,” he said.
They might be more attuned to “the bigger picture of downtown Indianapolis and the city itself and will be more likely to do something that’s advantageous, even though it may not have a double-digit return at the end of the day,” he added.
Goldsmith, who was mayor when the mall opened, told IBJ he believes the mall “survived well beyond original expectations” given the massive changes in the retail landscape, including the advent of online shopping.
But to allow the property to move to a new phase, he said, consolidating ownership even further could go a long way.
“The ownership structure was necessary at the time—the only way to get the project financed and built,” he said. “But the number of owners, some now not even local, presents obstacles to reimagining the future. New ownership is an important step forward.”
Collins declined to specifically say whether the ownership group plans to remain involved in the project once a developer is selected, but he indicated there’s an appetite for continued involvement.
Talbott said the fact that the ownership group is seeking a partner indicates the owners want help financing whatever comes next.
The mall has not been particularly lucrative in recent years. From 2018 to 2020—the most recent years available—it had $2.9 million in profit, despite seeing a decline in occupancy and sales per square foot, according to annual reports on the property filed with the city.
In 2020, as the pandemic decimated in-person retail, sales per square foot were about $184, after several consecutive years of sales in the low $300s. Compare that to 2007, when annual sales were about $406 per square foot.
In fact, the city itself (which financed $187 million in bonds for the project, which were paid off in 2020) has reaped far more from the property than the owners in recent years. The mall has generated $69 million since 2015.
“This has been an incredibly important asset, both for the ownership group and for the city, for the last 30 years,” Talbott said. “I think all parties are committed to seeing that that continues.”
City officials said they expect any redevelopment will be accompanied by incentives. That’s likely to come in the form of tax-increment financing—the tool the city uses most often for big developments.
“Anytime there are incentives on the table, we want to ensure that we are leveraging those in a way that is going to have the most impact possible on behalf of both the property that we’re focused on transforming but also for the benefit of taxpayers,” Schaffer said.
The Indy Chamber’s Bailey-Bernard said she is all but certain taxpayer dollars will be allocated for the mall like they were in the 1990s, but it’s too early to tell how much.
“As with all developments,” she said, “it just really depends on where the gap is and where the need is, for the city and or the state to step in and provide those incentives.”•