Keystone at the Crossing office park on the market as sector’s struggles continue

One of the largest office parks in central Indiana is back on the market, five years after it was purchased by a pair of out-of-state investment firms.

Keystone at the Crossing has been listed for sale—without an asking price—by its owners: New York City-based DRA Advisors LLC and Chicago-based M&J Wilkow Properties. The 1.08 million-square-foot office campus spans five office buildings and one small retail building.

DRA Advisors LLC and M&J Wilkow Properties acquired the campus in July 2019 for $149.7 million. The five office buildings are located at 8888, 8900, 9000, 9100 and 9200 Keystone Crossing, and the retail building is located at 8930 Keystone Crossing.

Two real estate sources, who spoke on the condition of anonymity due to the sensitive nature of the deal, told IBJ the sale stems from a continued withdrawal of capital from the office sector.

The sources each said a loan for the property is expiring this year and the lender opted not to refinance due to the tightening market and the diminished reliability of traditional office space.

“None of the numbers work, so everyone’s just put their hands in the air and they’ve quit,” one source said. “The whole park just has to be … recapitalized with a new owner.”

The property is expected to sell for significantly less than what it fetched in 2019, both sources said. One said the companies would be lucky to get half that amount.

Keystone at the Crossing is being marketed by the Chicago office of New York-based brokerage Newmark Group. A broker for Newmark deferred questions to DRA Advisors and M&J Wilkow, both of which could not be immediately reached for comment.

According to advertising material, the current occupancy of the property is 68%, with remaining lease terms averaging about 4.4 years. IBJ reported at the time of the 2019 sale that occupancy was 83%.

John Robinson, managing director for the Indianapolis office of Chicago-based JLL, has been leasing the Keystone at the Crossing buildings for nearly 20 years. He said he’s not surprised by the owners’ decision to depart the property.

“I think this is a sign of what is and what will continue happening across the entire country. This is happening in all markets,” Robinson said. “The drop in values is having a major impact on the ability to refinance or continuing to own these projects, so this is happening across the country and we’re seeing it here. It’s going to continue for a while, and we’ll see it on a lot more [properties], locally and nationally.”

When the property was acquired by the firms from Pennsylvania-based Equus Capital Partners Ltd. (which had owned the 27-acre campus since 2005), sources at the time told IBJ that plans were being set for extensive upgrades to the property. But most of those improvements never materialized due to the coronavirus pandemic, which continues to have lingering effects on the office market due to the shift to remote work in corporate America.

When it owned the Keystone campus, Equus made more than $20 million in capital improvements. The campus’ amenities include a food truck court, outdoor seating, tenant lounges, a fitness center with showers and locker rooms, two parking structures and surface lots adjacent to each building.

The office park, developed between 1975 and 1988 by Indianapolis-based Duke Realty, is home to dozens of the area’s largest companies, including several real estate brokerages and law firms.

The park is immediately adjacent to the Fashion Mall, which owner Simon Property Group announced last week will receive an expansive renovation on its eastern end. The project is slated to add up to 100,000 square feet of top-tier office space, as well as new retail, dining and entertainment options.

Robinson, who is handling leasing for the Fashion Mall office space, said the Simon announcement is wholly unrelated to the listing of Keystone at the Crossing.

And, according to Robinson, other office properties will continue to face challenges until markets loosen and more funds become available for investment opportunities.

“It all comes back to the availability of capital, and capital is fleeing the office space market right now, as it relates to a massive increase in supply and the drop in demand from remote work,” he said. “It begins this kind of circular death spiral of no demand, oversupply, no capital, drop in value, and inability to raise funds. It makes the market worse, until we get back to the top of that cycle again.”