Recession slows the creation of a self-contained Boone County community

Creating a self-contained community on 1,700 acres of farmland could take much longer than the 15 to 20 years Duke Realty
Corp. predicted.

The Indianapolis-based
real estate company has been working since 2003 on Anson, its ambitious mixed-use development in southeastern
Boone County.

Anson could
become the largest neo-urban-style community in the state. But as home sales creep along, and without a significant
commercial deal since the middle of 2008, General Manager Thomas Dickey no longer talks about time lines.

"It doesn’t make a lot of sense to re-project,"
he said. "We have no debt. We don’t have lenders that we have to keep happy. Our focus is on executing
what we’ve got right now."

Dickey said Duke might even opt out of developing the final phase, which includes high-rise offices, more residences, and
an urban-style town center.

"It’s a great plan. We hope to build on it," Dickey said.

But Duke doesn’t yet own the 580 acres west of Eagle Township reserved for the urban-style components
that would set Anson apart from other sprawling developments. The land is under purchase options that
come due between 2011 and 2017. Dickey said it’s possible Duke won’t exercise those options.

"Would we love for a residential developer
to come in and buy all this?" Dickey said. "There are no buyers. We’re not sitting around whining
about it."

Anson
begins at State Road 334 and works north, toward an industrial park called AllPoints at Anson that Duke is developing
with Browning Investments. It’s a three-mile drive from Duke’s southern 600 acres to AllPoints, which is at County Road 400
South and Interstate 65.

Browning-Duke’s big score so far is bringing a large employer to Boone County. The mail-order pharmacy Medco Health Solutions
is scheduled to take up its 350,000-square-foot building in the fourth quarter of 2009. Duke projects the company will employ
1,306 people by 2012.

The fact AllPoints would be part of a high-quality, mixed-use development helped sell Medco on the location, Dickey said.
Because each component of Anson makes the others more marketable, he said, Duke would ensure that any developer purchasing
property at Anson sticks to the plan.

Duke, Browning-Duke and Boone County collectively have invested $50 million in roads, water and sewer at Anson, Dickey said.

Boone County established two tax-increment financing
districts to pay for the interior roads at AllPoints, and on the 600 acres north of State Road 334. Under
the arrangement, additional property tax revenue generated within the districts goes toward bonds issued
to pay for the work. The first payments on $10.6 million in bonds come due in 2011.

Payments began this year on the $13.2 million in bonds issued for infrastructure in the retail
and residential area. Because Duke guaranteed the tax revenue, the company could owe $200,000 of the
$600,000 due this fall.

"We’re hoping the south part will cover itself soon," Dickey said.

Despite the housing setback, Anson is slowly transforming a sleepy corner of the county.

County Road 400 South, for example, was a gravel
lane between farm fields before Browning-Duke built AllPoints. The road now sports the same high curbs
and grassy median found to the south in The Neighborhoods at Anson.

Local officials remain enthusiastic. Whitestown annexed Anson, and the town council would have
the final say on any deviations from the plan requiring a variance.

"It’s master planning at its best," Town Councilwoman Susan Austin said. "It’s
what we have not had in Boone County."

Patience required

The problem for Duke is that its first phase of home building was set to begin just as the real estate bubble burst. That
means the company has few rooftops to lure retail developers to its extensive commercially zoned holdings along State Road
334.

Dickey said Duke
has reduced land prices for retail twice since the first of the year.

"We want to create activity," he said. "Activity breeds activity."

Duke’s original designated builder, Los Angeles-based
KB Home, was supposed to start building in the fall of 2007, but pulled out of the Indianapolis market
that summer.

Duke teamed
up with locally based Hansen & Horn in the summer of 2008, but by then the market ground to a halt.

Hansen & Horn started selling in the winter
of 2008, and the first buyer moved into their home in late April. Six more houses are under construction.

The multifamily projects moved more quickly.
An 80-unit apartment building by locally based Flaherty & Collins is fully leased. The firm is scheduled
to start work on 213 more apartments this fall.

Ryland Homes has sold 36 of 54 planned town homes.

Duke’s deal with Hansen & Horn shows just how far the housing market has fallen. The builder
is not starting construction before homes are sold, and it’s not required to buy land from Duke by any
certain date. Yet Hansen & Horn is the exclusive builder on the first 168 lots.

Duke is also backing Hansen & Horn with
marketing and public relations. Earlier this month, the company held a ceremony to mark the first single-family
house sold. David and Christine Kilgour bought a brown brick Italianate-style house overlooking a narrow,
weedy lot that will become a grassy common area.

The new urban concept means densely packed buildings coupled with amenities like paths and parks.
Dickey hopes that will appeal to home buyers with a "back-to-basics" mentality. Plus, prices
in the first phase can be under $200,000, a relative bargain in the affluent Zionsville school district.

"We need to sell as fast as possible,"
he said.

Long-term
vision

With
Anson, Duke has cornered a large part of the next suburban frontier west of Zionsville.

"Anson is obviously in the path of growth," said Rich Horn, president of The Stratford
Co., a mixed-use and senior housing developer.

Horn is also a former Duke executive, though he was not involved in Anson.

"In the long run, I’m sure it’ll do fine,"
he said. "How long it takes is anybody’s guess."

Residential development was an unusual move for Duke.

"The reason we’re doing it is to create a place where commercial development wants to be,"
Dickey said.

At Anson,
Duke will be selling, rather than leasing, the ground under retail. The company exited the retail construction game
in 2008 to focus on its core businesses, industrial parks and medical offices.

Part of the team that conceived of Anson, Dickey admitted that its first retail and residential
phases lack features like detached garages that are found in other new urban developments.

"It’s an absolute fact—this is 80
percent traditional, 20 percent new urban," he said.

Until Anson, the only other example of new urban design in central Indiana was Village of West
Clay.

The main difference
between Anson and other new urban projects is the ratio of commercial to residential space. Along State
Road 334, Duke planned regional shopping centers akin to Traders Point, rather than a smattering of shops to serve the new
housing.

Duke has had
early success with The Marketplace at Anson, a 38,500-square-foot shopping center on the south side of State Road
334. Anchored by Lowe’s, the center is 55-percent occupied. Talks are under way with casual restaurant chains, which feed
on daytime traffic that’s been boosted by Amazon.com and other occupants of AllPoints at Anson.

The rest of Duke’s retail ground is a different
story. Meijer bought land in Mills Station at Anson on the north side of S.R. 334 in March 2008, but
has yet to commence construction.

Dickey said Meijer is waiting out the broader economy, as well as for the rooftop count in the area to increase. So far, 123
apartments, town homes or single-family houses are built or under construction.

Originally, Duke hoped to have 1,000 residential units built by 2008, Dickey said. "We thought
that would’ve been enough of a signal, this second phase of retail would’ve been done by now."