Lender forecloses on two downtown office buildings

Two major downtown office buildings located within a block of one another have been placed in receivership after their owner defaulted on a $28.5 million loan.

The two buildings, Market Square Center at 151 N. Delaware St., commonly known as the “Gold Building,” and Two Market Square at 251 E. Ohio St., are owned by Santa Monica, California-based Hertz Investment Group.

HSBC Bank USA National Association filed to foreclose on the properties July 25. Marion Superior Court Judge David J. Dreyer appointed the local office of Cassidy Turley as receiver Aug. 8.

Hertz received the $28.5 million loan in April 2006 to buy the buildings and an adjacent parking garage, according to the suit. The complaint doesn’t specify how much Hertz still owes on the mortgage or when it stopped making payments.

Both buildings are among the largest downtown based on square footage.

With about 420,500 square feet, the 20-story Gold Building ranks as the 10th largest. One of its biggest tenants is the Marion County Public Defender, which occupies 52,000 square feet. Constructed in 1975, the building is 73-percent occupied, according to IBJ statistics.

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 and is just 62-percent occupied, according to IBJ statistics.

But vacancies at both buildings could rise even more if the prosecutor and public defender leave when their leases expire within the next five years. The offices tentatively plan to move in 2018 to a proposed $500 million criminal justice center, which will combine 34 criminal courts and several county offices on part of the former General Motors stamping plant property on the western edge of downtown.

Hertz officials did not immediately respond to an IBJ request for comment  Wednesday morning.

Jon Owens, an office broker at Cassidy Turley, said two clients left the Gold Building last year.

“They weren’t reasonable and weren’t willing to meet the market,” he said of owner Hertz.

The losses of the prosecutor and public defender could deal yet another blow to downtown—already struggling to fill office space and hamstrung by a vacancy rate hovering above 20 percent. At least one other large building is in receivership as well.

Market Tower at 10 W. Market St. is set to be sold at a sheriff’s sale after an affiliate of embattled Indianapolis developer HDG Mansur defaulted on loans totaling $60 million.

HDG Mansur President Harold Garrison developed Market Tower at a cost of $92 million in the late 1980s with former business partner Lee Alig, who retains no ownership in the building.

Market Tower ranks as downtown’s sixth-largest office building, according to IBJ statistics, with roughly 517,500 square feet of rentable space. The tower was 91-percent occupied in 2011, the last time HDG Mansur disclosed its occupancy.

Hertz, meanwhile, owns another downtown office complex. It completed its purchase in April 2013 of the nearly 650,000-square-foot Capital Center and 525-space underground parking garage. The two-tower comlex at 201 and 205 N. Illinois St. is the fifth-largest downtown office center and is 77-percent leased.