Hendricks’ growing reputation led to Circle Centre opportunity

Hendricks Commercial Properties has spent more than $550 million to acquire and redevelop properties across Indianapolis and Carmel since 2013. But with a major redevelopment of Circle Centre Mall on the horizon, the Beloit, Wisconsin-based firm’s leaders say they’re just getting started with work they hope to do in central Indiana.

The privately held developer wants to parlay its success on projects like the lauded Ironworks apartments and hotel near Keystone at the Crossing and the ongoing Bottleworks District on Massachusetts Avenue into more development opportunities here.

In fact, it was the goodwill Hendricks established with local leaders during its more than a decade in the city that led to the $600 million redevelopment it’s now tackling for the aging Circle Centre. The project is expected to be one of the city’s largest in the next five years—and one of downtown’s most transformative.

Hendricks announced in December that it was in talks to acquire Circle Centre from the mall’s longtime ownership group, Circle Centre Development Co., and had a three-party deal with the city and the Indiana Economic Development Corp. to overhaul the property.

While neither deal is finalized, Hendricks CEO Rob Gerbitz told IBJ the closing on the mall property should happen in April or early May and the public-private partnership agreement involving the former L.S. Ayres department store space, garages and a litany of incentives should be completed at about the same time.

“We’re actually now fully into the final stages of the due diligence,” Gerbitz said. “We’re really looking at the next few weeks to 30 to 45 days to execute. We want to close as quickly as we can.”

Hendricks has already secured financing for its mall acquisition at what Gerbitz said is a “solid” interest rate; he declined to disclose how much Hendricks is paying for the property.

A big undertaking

The Circle Centre plans call for essentially turning the venue into an open-air shopping center with an elevated outdoor central artery flanked on each side by a dozen four-story buildings with a mix of residential, parking, entertainment, retail and office.

The outdoor spaces would replace the mall’s main hallway and a series of covered skywalks that now connect the property’s buildings with other parts of downtown. It would be a shift for the two-block space, particularly when it comes to how the city markets itself to conventions and events looking for space during cold-weather months.

Hendricks tentatively plans to put $100 million into a first phase of the redevelopment, to be completed by 2028, with the remainder of the investment coming in through 2033. The first phase is expected to focus on the southern block—bordered by Illinois, Meridian, Georgia and Maryland streets—but Gerbitz has said that could shift depending on interest in the northern block’s L.S. Ayres building, which was most recently home to Carson’s.

Gerbitz said the company has to be “flexible” with its vision but expects the open-air nature of the project to be retained. He added that the property will remain a year-round destination, with the firm looking for creative ways to help shield visitors from inclement weather.

“We’ve been working this in complete parallel with the city, the state, everybody … and it’s been awesome,” he said. “That’s one of the things I like about working in Indianapolis, because we’re all trying to get to a common goal. That doesn’t mean everyone just says, ‘OK, do whatever you want to do,’ or anything like that. That’s definitely not the case. But we work together to get to the end result, and we’re right on pace.”

City and state officials approached Hendricks in mid-2022 about making a pitch for the mall property. Hendricks has spent the past two years fine-tuning its yet-to-be-named concept and working on separate agreements with Circle Centre Development Co. and the city and state.

A nonbinding agreement that Hendricks reached with the city and state in July didn’t include a purchase price for the city-owned properties, including the L.S. Ayres building and a pair of parking garages. That’s still being negotiated. But the agreement outlined likely city and state incentives for the project, including at least $64 million in tax credits and more than $24 million in partially forgivable loans.

The mall is also part of a $75 million application for Regional Economic Acceleration and Development Initiative funds submitted this year by the Central Indiana Regional Development Authority. The application put the mall in a category for projects of more than $10 million and also submitted it as one of the city’s priority projects for funding from the Lilly Endowment, which has pledged to match state READI grants.

Gerbitz declined to specify how much the region sought for the mall project because the money has not been awarded.

Building goodwill

Hendricks’ first Indianapolis project, the $30 million Ironworks apartment project on the north side that opened in 2015, is now part of a larger Hendricks development that includes a hotel and more than a dozen retailers and restaurants. That experience played a big role in positioning the company as a serious player here, observers and insiders told IBJ.

And at Bottleworks, Hendricks has invested more than $400 million in its first two phases. That’s $100 million more than the company planned to invest in a total of four phases.

“When you experience what they’re doing, like Ironworks and Bottleworks, it makes a big impression, which is that they really put a lot of effort into the design and the quality of their developments,” said Doug Morris McCoy, the Al and Shary Oak director of real estate at Indiana University.

“They have a long-term perspective, and the proof is in the pudding, right? They’re not a ‘Get in, get out, build it for as little as you can, then sell it’ type of company, which is the sort of thing that communities fear” from out-of-state groups.

So far, Hendricks has not sold a single Indiana holding, Gerbitz said. And while the company does have some local properties that could, he said, fall more under the category of “merchant” real estate, where the company makes renovations and eventually sells, its major holdings here are squarely outside that category.

“These kinds of investments—like a Bottleworks, Ironworks and Circle Centre—you cannot have a short-term vision for it, because it’ll never work,” Gerbitz said. “First of all, it’s too damn hard to build. Building stuff today is really, really hard, and it takes time.”

He said the company’s vision for the quality it expects to develop in its major projects requires it to “be a little bit more patient and take our time to get things done,” he said. “Everyone always likes the buildings when they’re done, but sometimes when you go through the process, it’s a challenge.”

Hendricks was founded in 2000 by Diane Hendricks and her late husband, Ken. The pair started ABC Supply, a national roofing, siding and window company, in 1982 and parlayed success there into real estate investments and redevelopment projects.

Hendricks is one of the richest women in the United States, according to Forbes magazine, with an estimated net worth of $15 billion as of last June. She is also a Republican mega-donor, although city officials told IBJ party politics have never prevented a Hendricks-backed project from getting done in Indianapolis.

“If a city called and asked for a character reference, I would say: … ‘The smartest move you make would be to take their call and work with them,’” said Dan Parker, chief of staff and deputy mayor for Indianapolis Mayor Joe Hogsett. “I’m not saying that Bottleworks has been easy, but I think the way it’s worked out since the beginning, with them delivering the results that they said they would, that’s critically important.”

Gerbitz said Hendricks’ focus is solely on rehabilitating and reenergizing dilapidated buildings and properties that present opportunities for investment. That kind of work is not political, he said.

“Diane and I love old buildings and those that have been brought to life again,” Gerbitz said. “In some cases, we’re re-creating a building that was there 100 years ago, at least on the façade portion. As a company, we want to honor history, and there’s something powerful [in] that for us.”

The tack is one Hendricks took with the development of its first two phases of Bottleworks, attending numerous Indianapolis Historic Preservation Commission meetings and hosting community input sessions to ensure the property respected the history of the former Coca-Cola Bottling Plant, at one time the largest bottling plant in the world.

He said the Circle Centre project will have a similar aim, with plans to reconstruct historic facades along Washington Street that reflect older low-rise buildings that were in place before the mall was completed in 1995.

“This is part of our DNA and how we look at things,” he said.

Focused on details

Catherine Esselman, founder of Indianapolis-based real estate firm Cat Consulting LLC and former real estate development director for Downtown Indy Inc., said Hendricks’ expected involvement in Circle Centre is “huge” for the city, in large part because of the company’s track record.

“There’s a certain nuance to successfully executing a redevelopment project like this and to have a good relationship” like what the city has with Hendricks, she said. It “is just going to make a good deal even better.”

Parker has worked with Hendricks on its city projects, including on infrastructure for Bottleworks District. He said the company is unique in the attention it pays to detail, including how it responds to feedback from residents and community collaborators.

“They very much get into the nitty-gritty detail, and I think that’s important when you’re dealing with a developer,” he said. “The result out there speaks for itself.”

Parker said city officials expect that “what we get to see with Circle Centre” will follow the pattern of patience and quality Hendricks set at Bottleworks. “[The design] might not be the same, but I think that they’re going to take the time to figure it out and not just go with the original renderings,” Parker said.

Indiana Secretary of Commerce David Rosenberg said in written remarks he believes the state and Hendricks share “similar visions” for Indiana’s future, largely focused on unique developments that attract and retain talent, support families and create opportunities for new and existing businesses.

He said the company’s past investments demonstrate its commitment to that vision and helped position the company to take on Circle Centre.

“The company’s investments have helped attract new global interest and new visitors, while preserving historic landmarks that have contributed to the state’s unique story,” Rosenberg said. “This trend will only grow with Hendricks’ recent deal to acquire Circle Centre Mall.”

‘They’re engaged’

Local construction firm Shiel Sexton has worked with Hendricks since the company began developing the Ironworks apartments and is now involved in the second phase of Bottleworks, which is expected to be completed next year.

Kevin Hunt, president of the firm, said all companies with whom Shiel Sexton works want their projects to be successful, but Hendricks is particularly focused on ensuring that every aspect is thoughtfully considered.

“They bring value to the community because they’re engaged, and they put a great project and product onto the market,” Hunt said. “They’re fair but firm with their tenants and their contractors like us … but they’re demanding—in a good way. They have high expectations for their projects and the people making them happen.”

In Boise, Idaho, a local leader told IBJ he has been impressed with Hendricks’ approach to redevelopment in that city’s downtown. The company has at least five properties in Boise, including The Owyhee, a $22.5 million redevelopment of an existing building comprising office, retail and apartments. The company is also set to complete construction of its $68 million Hotel Renegade this spring.

“It’s really reassuring when a firm like Hendricks, that honors historic preservation and appreciates the past, has some of these local treasures in its hands,” said John Brunelle, executive director of the Capital City Development Corp. in Boise. “For us, it’s still a fairly new relationship, because development projects take you quite some time, but we’re glad they’re here. They’re doing some cool stuff.”

In Beloit, where Diane Hendricks and her firm cut their teeth in real estate development, a city official said the company has been instrumental in revitalizing downtown and other pockets of the city.

Sarah Lock is director of strategic communications for the city of Beloit. She said Hendricks’ work there has gone beyond buildings and is helping usher in a wave of entrepreneurship for the city, which sits near the Wisconsin-Illinois border. The company supports business incubators and small office buildings that serve as home to various fledgling companies and not-for-profits.

She said Hendricks projects have also given life to former industrial facilities. In Beloit, Hendricks created an Ironworks campus that is home to its headquarters along with a YMCA and numerous other users. The company also plans to create an entertainment venue on the campus that will feature space for musical performances along with indoor and outdoor game areas, duckpin bowling and an arcade.

“Hendricks has had a significant impact,” Lock said. “They have done countless projects in our community that have helped improve the quality of life and needs that were previously unmet in our city.”

Continued investment

Hendricks is among the most active developers downtown, according to IBJ research. Aside from Indiana University Health, which is building a $4.29 billion hospital campus north of Interstate 65, and the city of Indianapolis, which has committed $751 million for a 40-story hotel and convention center expansion at Pan Am Plaza, the firm is second only to Indianapolis-based Keystone Group in money committed to downtown development.

Keystone is set to finish the $81 million InterContinental Hotel at 17 W. Market St. later this year and is working on the $1.5 billion Eleven Park development at the former Diamond Chain Manufacturing Co. site in the southwest corner of downtown, adjacent to the White River. Its investments—also including the 220 N. Meridian office tower conversion in 2022—total $1.75 billion.

Hendricks’ investments total just more than $1 billion, between what’s already completed at Bottleworks, the Circle Centre plans and its improvements to properties like the Century Building on Pennsylvania Street and the Massala Building at the mouth of Massachusetts Avenue.

But the figure for Hendricks doesn’t include what could come in future phases of Bottleworks, which Gerbitz said the company is studying extensively now. What was originally considered to be the fourth phase, a 10-story office tower near the interstate, might be started sooner because of the extraordinary office demand for Bottleworks properties to date. Gerbitz said most office space in the first two phases is leased—with “a lot of interest” in more.

Gavin Thomas, vice president of development for Hendricks’ Indianapolis operation, said the company is “well on our way” to further investment in Indianapolis. In fact, he said, the company considers the city one of its most important markets.

“We have other properties throughout the country, but there, it may be one or just a few,” he said. “We’ve found success here, and my understanding is, we’re going to continue to do more things here as time goes on. So we’re not going anywhere.”•