UPDATE: Around 9:15 p.m. the Indianapolis City-County Council approved the issuance. Original story below.
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INDIANAPOLIS — Tonight the City-County Council is expected to approve the issuance of $625 million in bonds to build a headquarters hotel in downtown Indianapolis after a local developer and private bankers failed to reach a financing scheme.
The 40-story, 814-room Signia by Hilton Hotel on Pan Am Plaza would be linked to the expanded Indiana Convention Center and bring a second headquarters hotel downtown as Indianapolis seeks to keep pace with other regional and national cities in the chase for convention and visitors business.
”We compete daily with major cities who don’t want us to expand, who want to take business from Indianapolis,” said Visit Indy Vice President Chris Gahl. ”Austin, Nashville, Atlanta, Orlando. All cities with cranes in the air. All cities with similar projects in the works. So, as a city, we’re at this inflection point. Are we going to invest in our city’s tourism industry where over 83,000 men and women depend on a paycheck, our time-tested strategy that has helped attract major sporting events, major conferences, allowed growth of restaurants and museums and attractions? The answer for us is, yes.”
Gahl estimates $300 million in already booked or conditional contracts will be lost if the city doesn’t follow through with the Hilton Signia project.
Visit Indy expects that the addition of a headquarters hotel would permit Indianapolis to not only bid for bigger conventions but potentially hold two large conferences simultaneously.
”We have seen numbers return to pre-pandemic level in terms of attendance at conferences that happen inside this building. When we look to translate that into future convention bookings, our pace is where it needs to be for ’24 and beyond,” said Gahl. ”When we look at in the pipeline, groups looking to close, we have a very robust pipeline from 2024 through 2032, so, we are not worried from a convention visitors bureau perspective that groups won’t meet or won’t drive attendance to a physical building like the Indiana Convention Center.”
Gahl said that while downtown hotel occupancy rates are still below pre-2020 levels, a strong month of May is expected to boost the visitors industry revenue bottom line.
”When you look at hotel occupancy, not only downtown but throughout Marion County and the entire metropolitan statistical area, when we looked at Air BnB, those listings were being snapped up very quickly, many of our hotels could command a Friday night, Saturday night, Sunday night three night minimum which is always desirable, and so we would anticipate a really strong May, even compared to last May year over year.”
The site’s original developer, the Kite Reality Group, failed to convince the private financial market of the viability of the project amidst inflation, rising interest rates and the uncertain future of the convention industry.
The City then determined it would undertake raising the capital to finance the project at lower rates than a private developer could attain.
”We have advantages in terms of financing that a private financer doesn’t have,” said Mayor Joe Hogsett. “If you’re going to compete with the Orlandos, if you’re going to continue to compete with the Las Vegases, or maybe even the Chicagos, you’ve got to expand your convention space and you do that in no uncertain way by adding additional rooms, so, it’s a transformative moment for the city.”
The candidate running against Hogsett in the November mayoral election, Republican millionaire businessman Jefferson Shreve, said Indianapolis should not second guess the decisions of the private banking and development sectors, even if it means delaying construction of the hotel and sacrificing potential convention business.
”Its possible you could lose a couple of those good ones, but you don’t build a cathedral for Easter, and the way these deals are underwritten, you’ve gotta have that stabilized occupancy room rates to make the deal work and so we could have a couple that opt out two or three years down the road…they’ll have to back fill those with a couple of smaller ones. That’s the risk to our city.”
While the life of the bonds would extend four decades, Hogsett is hopeful that as hotel revenues pay off the loans, the City will find a buyer for the site once it proves profitable.
Mike Wells, president of REI Investments and owner of the downtown Marriott, told City-County councilors last month that the City needs to clean up and not build up.
“Instead of investing money in a new hotel, the city should focus on making downtown a first choice destination by meeting planners by eliminating rampant panhandling and by making the downtown beautiful, clean and safe again. The city should also help revitalize downtown retail including the mall and help restaurants and other businesses that closed during the pandemic.”
A recently passed Economic Enhancement District for downtown Indianapolis would allow the council to tax property owners in the Mile Square and utilize those revenues for downtown enhancement as well as operations of a low barrier shelter for persons without shelter.
As part of the project, Indianapolis will pay Kite Reality $54 million for its interest in the Pan Am Plaza site as well as other site preparation work.
Kite assembled pieces of the property over the years at an estimated cost of $40 million, though recent appraisals pegged the value of the site at $29 million.