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One of the largest office complexes in downtown Indianapolis officially changed hands this week, with the new owners eyeing an update for the property that could result in its partial conversion to a hotel.
Capital Center Properties LLC, a partnership between Indianapolis-based firms KennMar LLC and The Ghoman Group, closed Monday on Capital Center, 201 and 251 N. Illinois Street. The holding company acquired the 648,000-square-foot property for $35 million, according to city property records.
The property consists of a 17-story tower to the north, at 251 N. Illinois St., and a 22-story south tower at 201 N. Illinois St., which are about 60% occupied and connected by a glass atrium. Their tenants include some offices of the Indiana Supreme Court, Sponsel CPA Group LLC, Fifth Third Bank and accountants BKD LLP.
The property was listed last December by Chicago-based Zeller Realty Group, which owned it through a holding company, following talks with its lender, two IBJ sources said earlier this year. The company bought the two-tower property in 2018 for $63 million.
KennMar and Ghoman have had the property under contract since at least April.
The firms plan to invest an undisclosed amount of money to make updates to the property, with the possibility of converting the upper six to seven floors of the south tower into an upscale hotel, although specific plans have not been finalized. The partners are also evaluating options for a national food and beverage tenant to occupy space on the first floor.
Brent Benge, president of KennMar, said the property is about 60% occupied, with about 200,000 square feet of space still available for lease. Capital Center is the fourth-largest office complex downtown leasable space, according to IBJ research.
“Capital Center is one of the nicest office towers in downtown Indianapolis, and the prior owners did a really good job, they were great stewards of this asset,” said Benge. “That has helped serve as a launch pad, I think, to lease the remaining vacancy. We’re bullish on downtown Indy, and I think with the companies downtown, and the people running the city, I think they’re doing a good job to to really bring demand back. I’m seeing it every day … and I’m excited about it.”
Both KennMar and Ghoman plan to relocate their headquarters to the towers as part of their acquisition. KennMar is currently based at The Pyramids office complex on the northwest side, which the firm acquired in 2022 and has been renovating ever since. Ghoman is based on the north side of Indianapolis, along West 86th Street.
Zeller in recent years has spent more than $18 million to revamp Capital Center, with upgrades to conference space, a fully renovated lobby with an expanded bar and coffee area, a new outdoor patio and improvements to the complex’s fitness center. Zeller also modernized the properties’ elevators and built out multiple move-in ready spaces for prospective tenants.
However, office space has seen a dramatic drop in demand since the pandemic, with multiple downtown buildings falling into foreclosure since late 2023, including Regions Tower and Circle Tower.
Benge said he is confident the companies’ plans for the property will allow them to invest in further enhancing amenities for existing tenants and help attract new ones, while the hotel will repurpose excess space that is no longer viable in a post-pandemic office market.
Amarbir “Alex” Ghoman, founder, chairman and CEO of The Ghoman Group, said he is looking forward to having the company’s offices downtown, and to getting started on updating the building.
“This is the best city to live, the best city to do business, and we are very excited to move our corporate office into Capital Center,” he said. “Perhaps once we are there, we will find more opportunities. We will change this perception where everybody has a negative perception toward office buildings, and we will redevelop them if we have to.”
Ghoman said it is too soon to say what kind of investment will be required to convert a portion of the property into a hotel. While he acknowledged that it could be a costly project, he also expects “a luxury hotel will add to the value” of the property.
“It’s going to take some time [to finalize a cost], and it depends on what brand it is, and what they require,” he said. “Whether there is fire safety involved, city codes involved, redoing the air conditioning—there are a lot of elements in putting a cost together. “If we’re doing a select service hotel somewhere, we always know what it takes. But this … it’s a different beast.”
Ghoman expects the 550-space parking garage at the property, accessible from both New York Street and Ohio Street, will continue to be used by workers, but could also be an amenity for those staying in the hotel.
KennMar and The Ghoman Group have enlisted the Indianapolis office of Chicago-based brokerage JLL to market the property and manage leasing.
Construction on Capital Center was completed in 1986 by Carmel-based developer R.V. Welch Investments. The towers were designed by Indianapolis firm Browning Day Mullins Dierdorf.
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