Hendricks strikes deal to acquire Circle Centre, plans $600M redevelopment

The Wisconsin-based firm behind Bottleworks District has struck a deal to buy most of Circle Centre Mall from its original investors and plans to spend $600 million over the next decade to transform it into an open air, pedestrian-focused campus with housing, offices and shopping. 

Hendricks Commercial Properties LLC also has a tentative agreement with Mayor Joe Hogsett’s administration that could allow it to acquire the land under the mall, its parking garages and the former L.S. Ayres building at West Washington and South Meridian streets that anchors the mall’s northeast corner.  

The details of that non-binding agreement—a term sheet signed in July—will still require the city and Hendricks to come to terms on purchase prices for the city-owned properties as well as other development details. But the agreement—also signed by the Indiana Economic Development Corp.—outlines likely city and state incentives for the proposed project, including at least $64 million in tax credits and partly-forgivable loans. 

“We truly believe that Hendricks will be able to make Circle Centre a destination again for downtown Indianapolis,” said Dan Parker, chief of staff to Mayor Joe Hogsett. “So, we’re incredibly excited about it.” 

Hendricks expects to close in the first quarter of 2024 on the acquisition of the majority of the mall from the private Circle Centre Development Co., which has 17 owners who partnered with the city to develop the mall in 1995. Neither company would say how much Hendricks will pay for the property. 

Hendricks—which also developed Ironworks at 86th Street and Keystone Avenue—tentatively plans to put $100 million into a first phase of the redevelopment, which will likely take place on the south-end block bordered by Illinois, Meridian, Georgia and Maryland streets. 

The first phase is expected to be finished in 2028, with the remainder of the mall redeveloped through about 2033. 

“This can become a transformative, dynamic, world-class development for Indianapolis,” Hendricks CEO Rob Gerbitz told IBJ. 

Hendricks expects to dismantle parts of the existing structure—particularly the central, interior hallway that currently runs the length of the building, from the mall’s north end at Washington Street to its south end at Georgia Street. The developer envisions replacing the hallway with an outdoor, elevated promenade that would be flanked to the east and west by a dozen four-story buildings with a mix of residential, parking, entertainment, retail and office space encompassing 1.9 million square feet. 

The developer’s initial plans also include what it’s calling a Monumental Staircase at the southeast corner of Illinois and Washington streets along with an esports-focused entertainment building, residential units across at least five buildings and retail on two separate levels. 

Gerbitz told IBJ that “the bones of the mall, fortunately, are really good.” 

“There will be things we feel we need to change, in converting it from a traditional mall,” he said. But “we’re a very patient investor, and we know the changes there will take years to come to fruition.”

The project’s goal, Gerbitz said, is to create a more intimate-feeling district within downtown and to breathe new life into a property that has been on the decline for several years. 

“Here we have an opportunity to, essentially, blow up the mall,” he said. But Hendricks’ plans remain tentative. “We have a lot of work to do in our planning. It will take us some time to get through a lot of that.” 

Hendricks crafted its vision for the property after the Beloit, Wisconsin-based firm was approached in mid-2022 by the city and state to make a pitch for the mall property. Gerbitz described the Indiana Economic Development Corp. as the convener who brought the parties together.

In the year-and-a-half since, Hendricks has been in conversations with the city and state about incentives and priorities for the project, while separately negotiating with the mall’s ownership about the property’s acquisition. 

In a statement, Hogsett said he expects a “monumental transformation” of the mall. The mayor said the partnership between Hendricks, the city and state “secures the future of the largest asset in downtown for the next era.”

And Adam Collins, an attorney who represents the mall ownership group. called Hendricks “the best caretaker and redevelopment partner we could have wished for. Their track record of stewardship and transforming public spaces in Indiana is unparalleled, and their vision will be critical in reimagining Circle Centre, one of our state’s crown jewels.”

Circle Centre was developed by fusing a number of existing buildings and facades with new structures, creating a traditional mall structure with just a few key entrances and stores facing an interior hallway. That type of structure has fallen out of favor with shoppers and developers. 

Instead, Hendricks plans to create a campus that’s more like a village, with some of the existing buildings torn down—either in whole or in part—and others retrofitted and given new facades and designed to operate as stand-alone buildings connected by the outdoor promenade, plazas and green space. 

Under Hendricks’ initial concept, the Artsgarden—a glass-enclosed structure suspended above the intersection of Illinois and Washington streets by skywalk connectors to the buildings on each corner—would be disconnected from the mall. It would retain connections at the northeast, northwest and southwest corners, but would be supported by pillars at the southeast corner. That would make room for the grand staircase.  

Gerbitz emphasized that Hendricks’ concepts are a starting point for planning, not a firm proposal. For example, he said, the project’s first phase could shift from the south end to the north if there’s a compelling opportunity to redevelop the L.S. Ayres building, which was later home to Carson’s department store before it closed in 2018. 

Critical time 

The planned redevelopment of the property comes at a critical time for Circle Centre. In 2022, the mall posted its first increase in profit year-over-year since 2018, with $4.29 million. While an improvement, it’s significantly down from the 2018 profit figure of $13 million.  

The proposal also follows nearly two years of questions about what would come of the property after Indianapolis-based Simon Property Group had its 15% share bought out by other CCDC partners in February 2022. 

The decline of Circle Centre since it opened in 1995 has been anything but quick, however. Original anchor tenant Nordstrom departed in 2011, while Carson Pirie Scott closed its three-story anchor store in 2018. The Nordstrom space has since been filled by Helium, The Indianapolis Star and, most recently, Direct Connect Logistix. 

The interior concourses have lost many of their nationally known tenants in the last decade, including Gap, Gap Kids, Eddie Bauer, GameStop, FAO Schwartz, The Loft, The Limited, Abercrombie & Fitch, Johnston & Murphy, Victoria’s Secret, New York & Co. and Express. 

But the mall has had more success attracting restaurants, with newer eateries like Punch Bowl Social, Sugar Factory and Yard House filling gaps after other restaurants left.  

Soon, Mt. Fuji Sushi will take over nearly 6,000 square feet at the southeast corner of Illinois and Maryland streets. That space was previously occupied by restaurant-and-bar chain Primanti Bros., which closed in 2020 after four years in the location.  

Scarlett Andrews, deputy mayor of development for the city of Indianapolis, said Circle Centre has generally been a success, but she said now is a prime opportunity for redevelopment. 

The mall “was important,” she said. “It was critical for downtown redevelopment at that time and built momentum.” 

Gerbitz also said it’s too soon to know how all of Circle Centre’s existing tenants—including those inside the mall—will be affected by the project. He predicted that many of those on the upper floors will be required to vacate entirely, or at least subsist through extensive reconstruction of their buildings. 

Others, like Harry & Izzy’s, Helium Comedy Club and those with frontage along Meridian and Maryland Streets, will likely be able to remain in operation throughout construction. 

“We have to be very cognizant of how this phasing goes … because we’re not going to lose any of them—we want them to continually thrive during this process of redeveloping” the property, Gerbitz said. 

As currently proposed, the campus would consist of 376,000 square feet of retail space, including 135,000 square feet along the central promenade, and about 471,000 square feet of office space. 

Plans for residential space remain more tentative. The initial concept calls for 228,000 square feet of apartments, condos and other residential options, although Gerbitz said specific unit counts and rent rates are still being discussed.  

The city’s Andrews said having an affordable-housing component will be a focal point of negotiations for further city financial support. 

The company is also exploring how to incorporate entertainment spaces into the complex. 

Gerbitz said Hendricks is in early discussions with potential tenants, including at least one that originally considered Bottleworks. He declined to disclose the companies, but he said depending on who is willing to commit to the overhaul, the total cost and scope of the project could increase. As it stands, the company’s current concept includes about 72,000 square feet of entertainment space, part of which would be a dedicated esports facility. 

“It’s going to be a mix of most everything,” Gerbitz said. “Our biggest goal is to have something certainly from the outside that is dynamic, inviting and really just a fun place to be. 

“But then more importantly … the challenge is getting the really great dynamic uses inside,” he said. “Really the retail and entertainment [uses]—that’s the big push, because that’s what will make this thing really, truly take off.” 

Making the deals 

The agreement between Hendricks and Circle Centre Development Co. focuses on the transfer of the mall property and related leases with the city, said Collins, a partner at Wallack Somers & Haas. The deal is also expected to include rights to the Circle Centre name, although the new development is expected to be branded differently. 

“This is not a typical real estate transaction by any stretch of the imagination,” Collins said. 

The agreement between Hendricks, the city and the state is layered and includes possible incentives if the company meets various milestones. But those are all tentative. Hendricks and government officials will need to negotiate a final development agreement, and a timeline for doing so hasn’t been finalized. 

The term sheet between the parties calls for an eventual development agreement to address the specifics of the project, including Hendricks’ arts contribution commitments; the amount of affordable and workforce housing that would be incorporated into the development; and city-mandated diversity contractor goals, which require a project to use at least 15% minority-owned vendors, 8% women-owned vendors, 3% veteran-owned and 1% disability-owned. 

The incentive structure for the Hendricks project is substantially different from the one that led to Circle Centre in the first place. 

In the early 1990s, when the city was struggling to get the mall built, 20 companies and organizations agreed to become partners on the project and contributed $75 million to its $320 million cost. The remaining funds came from city and state government, with the last of the bonds for the project only paid off in 2020.

This time, the project is expected to be financed primarily through private investment. Gerbitz said Hendricks is not a developer that generally relies on incentives, although he acknowledged “it has to be a part of it in something as complicated as Circle Centre.” 

“But we also are bringing our own money to the table,” he said. 

The city has tentatively agreed to provide a $24.4 million no-interest loan for the project (which would be awarded through the Indiana Economic Development Corp.) that could be used toward the purchase of the mall property. Up to $10 million of the loan could be forgiven if Hendricks meets certain benchmarks, according to the term sheet. 

The state would provide $42 million in rehabilitation tax credits for the project, the term sheet says. 

In addition, the city and IEDC have agreed to include the project in a future Regional Economic Acceleration and Development Initiative—or READI—grant application to the state, which could provide additional funding for the project. 

“I think with its proximity and location with everything else going downtown, the ability to turn that into a true amenity and position it for the long term—and what the future of urban living, urban retail and urban amenity space looks like—really has the potential to be a game changer for downtown, not just [for] the next two or three years, but really for the next 20 to 30 years,” said Indiana Secretary of Commerce David Rosenberg. 

City options 

The city, which owns the parking garages at Circle Centre as well as most of the former L.S. Ayres building at the southwest corner of Washington and Meridian streets, is also evaluating options for its holdings. It currently leases the Ayres building to Circle Centre Development Corp. through an agreement separate from the larger mall agreement, along with the garages, which are managed by Denison Parking. 

The city could sell to Hendricks its ownership in the World of Wonders parking garage at 100 S. Illinois St.—which contains 1,500 spaces—although a price has not been determined. The parties are also negotiating the sale of the Red Garage at 48 W. Maryland St. (560 spaces) and the Blue Garage, 26 W. Georgia St. (735 spaces), as well as the city’s stake in the Ayres building. 

Officials would be able to either assign the city’s leases and management agreements for the garages to Hendricks, or new leases would be negotiated between the parties. 

“We have been in the process of valuing those ownership stakes and that real estate, in anticipation of giving Hendricks an option to those real estate pieces,” said Andrews, a deputy mayor. “We will need to negotiate a price on that, but [Hendricks] made clear to us that they want to own those assets as part of a redevelopment strategy.” 

The city also agreed in the term sheet to provide an undetermined amount of developer-backed tax-increment-financing bonds for the project. 

Parker, Hogsett’s chief of staff, said the city plans to be “judicious” with the use of TIF for the project but that he believes—just like when the mall was built—it will take extensive city involvement. 

“If this was easy, it would have been done long ago,” Parker said. 

Previous investments 

So far, Hendricks has invested more than $500 million in various projects across Indianapolis. That includes more than $400 million across the first two phases of the Bottleworks District development along North Massachusetts Avenue and $50 million in the Ironworks hotel and apartment developments at Keystone Avenue and East 82nd Street. 

It also owns and has renovated two downtown buildings—the Century Building at 36 S. Pennsylvania St. and the Massala Building, 310 N. Alabama St. and 341 Massachusetts Ave.—as well as the Woessner Building at 902 Virginia Ave. in Fountain Square. 

Hendricks “has really demonstrated the ability to not only navigate the public parts of the process but also has the financial capability and strength to complete the project,” Collins said. “It also has trust of the community as it relates to previous projects that [the firm] has successfully redeveloped.” 

But Hendricks, Collins and city officials all acknowledge the Circle Centre project is on an entirely different level. 

“They have freely admitted that this will be the most complex redevelopment [they’ve done], given the fact that they have a lot of tenants that are currently there that they want to keep,” Parker said.