Zipper’s future open to speculation:

The fate of “the Zipper Building,” a black-and-white office building at Washington Street and Virginia Avenue, is the subject of rampant speculation amid news a sale is pending.

The three-story flatiron-style building at 117 E. Washington St. is owned by a locally based partnership and managed by Freihofer Commercial Real Estate. Firm owner Walter Freihofer confirmed the building is under contract, but would provide no details, including when the sale is expected to close. He also would not identify the partnership’s members.

The 1961 building, nicknamed for its geometric design, was built for Merchants Bank and was designed by local firm Lennox Matthews Simmons and Ford Inc., one of the architects of the City-County Building. The 56,000-square-foot Class B building is about two-thirds occupied with tenants Roman Brand Group and Freihofer’s firm, according to the local office of real estate information company CoStar.

Roman Brand Group has been on a month-to-month lease for more than a year, said President Dan Roman. The agency rents 28,000 square feet, some of which is unusable because of the building’s triangular design, Roman said. Roman Brand has been looking for about 20,000 square feet elsewhere downtown, but hasn’t been notified about when or if it will have to move from the Zipper Building, he said.

The Zipper Building has been under contract at least once before, but that deal apparently fell through. Speculation about the roughly one-acre site includes upscale condominiums, a high-rise office tower and a hotel. Sources agree any buyer would probably raze the building because of an internal structure that makes conversion to multitenant space difficult.

The building is listed for $3 million, but it’s unlikely to sell for that if the buyer plans to demolish it.

“It’s hard to imagine someone spending $3 million to knock it down,” said Nick Arterburn, first vice president at the local office of CB Richard Ellis.

One scenario, local real estate experts said, is that a local developer has the building under contract while it tries to secure tenants for a build-to-suit office building.

At least two large downtown users of office space are in the market. Locally based law firm Bose McKinney is weighing whether to renew its lease at First Indiana Plaza, lease elsewhere or have a headquarters built, said Vicki Curtis, director of administration for the law firm. Its lease expires in 2008, she said. The firm occupies four floors, or about 50,000 square feet, of the office tower.

Bose McKinney doesn’t have a timetable for its decision but hopes to choose this year, she said.

The firm has a long-standing relationship with locally based Duke Realty Corp., which developed First Indiana Plaza in the early 1990s. Spokeswoman Donna Hovey said Duke doesn’t have the Zipper Building under contract.

Another downtown tenant, Columbus, Ohio-based Huntington National Bank, is also considering whether to renew or move, brokers said. The bank occupies 35,000 square feet, including a retail branch location, in Browning Investments Inc.’s Capital Center at 201 N. Illinois St. Representatives for Huntington couldn’t be reached for comment.

If two large tenants were to commit to a new office building, a build-to-suit on the site would make sense, local real estate experts said.

Although downtown multitenant office vacancy rates have held steady at about 16 percent in the past year, the market is bracing for a double whammy. Simon Property Group Inc.’s new headquarters at Capitol Avenue and Washington Street, set for completion in 2006, will empty Simon’s current 170,000 square feet of space at National City Center. And Guidant Corp.’s pending acquisition by Johnson & Johnson means an uncertain future for the medical device maker’s 60,000-square-foot headquarters in Bank One Tower.

Other real estate sources suggested the triangular-shaped Zipper Building site might be best suited for residential. Across Washington Street, Hearthview Residential successfully converted an office building at 110 E. Washington St. into high-end condos. Across Virginia Avenue, south-side developer Greg Allen is considering condos as one of the options for Jefferson Plaza, an eight-story office building Allen has under contract.