Arts & Entertainment, etc. and Real estate deals and Hotels and Real Estate & Retail

Storied luxury Canterbury hotel may sell

April 16, 2007

For years, the stately 12-story Canterbury Hotel stood at the pinnacle of downtown accommodations--a home away from home for celebrities like Michael Jackson, Kevin Costner, Cher and, of course, Mike Tyson.

But in recent years, the 99-room hotel's panache has faded a bit. Well-heeled business travelers, celebrities and professional athletes now are more likely to stay at the Conrad Indianapolis or Marriott Downtown.

The hotel could use a renovation, hospitality analysts say, to restore some luster and help it take on more modern competitors. Such an overhaul might be on the way, along with new owners for the independent boutique hotel at 123 S. Illinois St.

The hotel's controlling partner, businessman Donald Fortunato, is negotiating with a team of local businesspeople who could buy the property outright or sink money into a renovation in exchange for an option to buy. Fortunato, who will turn 80 soon, declined to name the potential buyers but confirmed a sale is in the works.

"It's a labor of love, and it's hard to give it up," Fortunato said. "But there comes a time for everything. If and when we decide to sell, I think it deserves to be in the hands of Indianapolis people."

In 1982, Fortunato and real estate executive Fred C. "Bud" Tucker Jr. began pouring some $12 million into a renovation of the building, which had opened in 1928 as the Lockerbie Hotel. When the hotel reopened in 1984, it was one of only a few places to stay downtown. The area around it--what's now Circle Centre mall--was a mostly barren block with parking lots and dilapidated buildings.

"We didn't know how bad our business was until the mall opened," said Fortunato, who over the years has dabbled in football coaching, insurance sales and real estate. He lives in the Chicago suburb of Northfield.

Fortunato bought his partner's interest after Tucker died in 1994. He is now the hotel's general partner and owns the property with several limited partners. The longevity of Fortunato's stake in the property--25 years--is unusual for hotels, which tend to change hands frequently.

Mark McClure, the Canterbury's general manager, said the hotel isn't officially for sale but that two local businessmen he described as "very prominent" may soon take over day-to-day operations. The men, whom he would not name, are considering an investment in the property in exchange for an option to buy it eventually, he said.

McClure and Fortunato would not disclose what price the owners are seeking or what their own appraisal shows the Canterbury is worth. For tax purposes, the hotel was most recently assessed at $5 million.

The hotel still has a loyal following and some impressive amenities: a private entrance to Circle Centre, five penthouses, tea in the afternoons, and evening turndown service complete with a chocolate truffle.

Canterbury officials say the hotel's occupancy is around 65 percent. That's just a few points shy of the 68-percent average for its peer high-end hotels in Indianapolis for 2006, according to data from Hendersonville, Tenn.-based Smith Travel Research.

But occupancy numbers alone can be deceiving. The Canterbury no longer commands rates as high as its peers. The lowest rate for a recent Thursday night at the Canterbury was $189. Meanwhile, the Westin Indianapolis low rate was $219, Marriott's was $239, and Conrad's was $259.

Before Circle Centre's opening in 1995 helped spur downtown's rivival, the Canterbury was home base for most of the celebrities who passed through Indianapolis. It was there that Mike Tyson raped a young beauty contestant in 1991--a crime that landed the boxer in prison and thrust the hotel into the national news.

"It was the luxury hotel in town," said Mark Eble, a hotel consultant and regional vice president for Philadelphia-based PKF Consulting Corp.

Eble said the Canterbury has a perfect location and will thrive again, with a little retooling. The cost of such a project could vary widely, he said, based on whether new owners opt for updates to the European boutique theme, or go for modern instead. Fortunato said he expects a renovation would cost about $1 million.

Some updates already have occurred. Last year, the owners installed new carpeting in the lobby, replaced furniture and draperies in about half the guest rooms, and updated the hotel's AAA Four Diamond restaurant, Danielli.

They also studied the possibility of adding a fitness center and piano bar on the roof; that option was architecturally feasible but cost-prohibitive, Fortunato said. Another possibility, condo conversion, was ruled out because of small rooms and elevators, narrow hallways, and the lack of parking.

Hundreds of new hotel rooms downtown have made it more difficult for the Canterbury to stand out. New chain hotels can tap into nationwide reservation systems--a luxury the independent Canterbury has to go without, although the hotel is a longtime member of Preferred Hotels and Resorts Worldwide, a referral service that helps level the playing field.

Hotel consultants say the property has drawn plenty of interest from potential buyers. A booming downtown hospitality scene and a planned $275 million expansion of the Indiana Convention Center should help.

The city needs more boutique hotels like the Canterbury, said Tim Worthington, president of The Worthington Group, a locally based hotel consultancy.

"A lot of people don't like brands," he said. "They like uniqueness, which is what boutiques offer."

Steven Huse stayed at the Canterbury often after he bought the restaurant next door, St. Elmo Steak House, in 1986. He considered buying the hotel five or so years ago but decided the cost of renovation was too high.

Huse hopes that whoever takes over keeps the veteran team of doormen he calls the "Mayors of South Illinois Street" that has been greeting customers for years. Like St. Elmo, the Canterbury has survived some lean times downtown, and that builds character.

"You felt like you were coming home when you went to the Canterbury," Huse said. "They went out of their way to take care of you."

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