Struggling tenants leave aging Merchants’ Square

Long before anyone in Carmel heard of roundabouts or sipped a $4 coffee at a Starbucks, there was retail shopping at 116th
Street and Keystone Avenue.

In the 1970s and 1980s, the location was known as Keystone Square Mall, an enclosed shopping center that served as a popular
weekend hangout for teens. In 1996, the area was reinvented as Merchants’ Square, a cluster of buildings housing well-known
national chains and independent retailers alike.

Now, the future and identity of Merchants’ Square is less certain.

The question is certainly on minds of tenants and shoppers as well as Ramco Gershenson Properties Trust, the center’s Michigan-based
owner.

Over the past five years, occupancy at the 277,000-square foot property has tumbled from chock full to 86.7 percent, as Old
Navy, Finish Line and other stores withdrew, and seemingly never-ending road construction complicated access.

Looming over it all is the rickety economy and contraction in consumer spending.

"What attracted us [to Merchants’ Square] in the first place was the new redevelopment of an old shopping center,"
said Greg
Willman, president of 316 Investments LLC, which has operated a Qdoba Mexican Grill at the center since 1998.

"There was a lot of energy around it," he said. "It was the place to be in Carmel. Today, there are a lot of
other options
in Carmel."

Development of Clay Terrace to the north and the Carmel Arts & Design District just a stone’s throw away downtown has
lessened
the appeal of Merchants’ Square. Not to mention extensive retail development in Fishers, Noblesville and Westfield–all competing
for tenants.

"One of the largest challenges can be described with one word, and that’s absorption," said Larry Davis, a principal
at locally
based Sitehawk Retail Real Estate and, until recently, Ramco Gershenson’s leasing agent for Merchants’ Square. "With
two,
three and four busy pockets of retail, there is only so much
space that can be leased and absorbed at one particular time."

Merchants’ Square felt the pinch most recently with the departure of Old Navy, which had operated there for a decade and planned
to remain open even after debuting a larger store at Clay Terrace last year.

Both Old Navy stores underperformed for parent company Gap Inc., forcing a corporate decision to close one, said Michael Sullivan,
senior vice president of asset management for Ramco Gershenson.

That decision left a 15,000-square-foot hole in Merchants’ Square.

"We have a few interested parties, but nothing concrete," Sullivan said.

Other recent departures include Starbucks, which last year closed a corner location next to Qdoba as part of a nationwide
reduction in store count. Locally based Finish Line Inc. pulled up stakes this year, while Bath & Body Works gave up its
presence
in favor of a store at Clay Terrace.

Other important tenants have remained faithful. Qdoba, for one, renewed its lease within the past few months.

The store has "lowish" volume, but continues to be profitable, Willman said.

"It has a very loyal customer base and we wanted to do everything we could to keep that location open," he said.

Longtime tenant Party Tree has hung onto its 17,000-square-foot space, and even exercised an option to continue its lease
two years before contract terms required it to, noted Mike McBride, Ramco Gershenson’s regional vice president of asset management.

Hobby Lobby, Panera Bread Co. and Petco also remain contractually committed to Merchants’ Square, McBride said.

Willman said Ramco Gershenson
shows little inclination to get Merchants’ Square back on track. He said he has very little contact with the firm, a real
estate investment trust with 89 retail properties
in 13 states, and has never been advised of plans to revitalize the center.

Ramco Gershenson officials stressed their commitment to the property.

"Far from what perceptions may have leaked out, we intend to make this a successful shopping center," Sullivan said.

One factor complicating that goal is the continued road construction immediately surrounding Merchants’ Square. The expansion
of Keystone Avenue calls for the intersection with 116th Street to be closed this spring to build a roundabout.

Access from Carmel Drive to the north is already convoluted, giving rise to concerns that shoppers will simply give up and
head elsewhere.

"It’s a little bit of a challenge," Sullivan said. "We have this [road] project that, for better or for worse,
a lot of tenants are concerned about." He added that
Ramco Gershenson has been in contact with city officials about the time line of the Keystone expansion and ways to improve
access during the construction.

Despite the upheaval caused by the road improvements and a faltering economy, Sitehawk’s Davis said Merchants’ Square retains
its most important feature-it’s location.

"In my opinion, it’s still a well-positioned property," he said. "It’s centrally located to a busy intersection
and one of
the highest demographics on the north side, and those fundamentals have never changed."