Sophia Square: is a smooth landing possible?
A “death spiral” is a situation that keeps getting worse and that is likely to end badly with great harm or damage being caused.
Currently, Sophia Square has 24 available units out of a total of 202.
This is an occupancy rate 0f 88.1% or a vacancy rate of 11.9%. Undesirable Indy has a vacancy rate of less than 5%. Indeed directly across from the Sophia Square complex sits Old Town on the Monon.
Old Town on the Monon has a total of 91 units of which 3 are available for an occupancy rate of 96.7%.
Another way to look at it is if 100% of units are habitable it would take nearly 3 years for Old Town on the Monon to turnover its residents one time. Sophia Square completely turns over their apartments every 9 months based on this sample.
This implies that almost no one re-signs a lease and units are always available year-round.
Sophia Square is in trouble.
The occupancy at which the effective gross income is equal to the sum of the operating expenses plus debt service. Breakeven occupancy is an important metric for lenders, developers, and operators as it is the point at which the property shifts from an operating deficit to an operating surplus. Real estate owners will often use rent concessions to speed the investment to breakeven.
Apartment Sector Likely to Experience Continued Rent Growth, Albeit at a Slower Pace
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Other differences were noticeable between the two Apartment complexes. At Old Town on the Monon, there were no outward indications of deferred maintenance.
The lower level at Old Town on the Monon had no missing teeth, vacant or underutilized space. The rental office is not in Prime Space on Main Street and is much smaller than Sophia Squares which is on Main St. occupying what should be the most valuable real estate in the city. Additionally, at least 25% of the total leasable first-floor Commercial units are empty or as in the case of the Leasing Office underutilized.
Scotty’s Brew House remains vacant
Sophia Square leasing office taking Prime Real estate on Main Street.
Underutilized space made necessary by the high turnover of tenants.
If all this were not bad enough one of the “businesses” that occupy prime retail is “All things Carmel” do they even pay rent? Based on their recent results I suspect Sophia will soon have another empty tooth or a mess of city IOU’s.
This has all the makings of another Shapiro’s story.
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This is not likely a positive sign.
Everything about this project from high vacancy rates, to recently paying property taxes late for both Sophia Square and Ersal Ozdemir’s residential taxes, plus the current refinance screams:
“Cash Flow Issues”
We will anxiously await the CRC’s report on this matter.
Otherwise, like many of the Mayor’s pet projects, taxpayers will end up holding the bag.
This was Mayor Brainard in 2012.
Will history repeat itself in 2022?
