Downtown hotel towers in works

July 2, 2007

When revelers leave a Pacers game or Conseco Fieldhouse concert now, they likely wander back to their cars via a mostly dark Pennsylvania Street.

That will change in the next couple of years if J. Greg Allen has his way. The south-side developer is pitching a massive project along Pennsylvania that includes hotel towers--one 28 stories, the other 17--to be built on property now used mainly for surface parking.

"We want to be part of the reinvention of downtown that has happened over the last several years," Allen said. "It's not a wing-and-a-prayer to do development in downtown anymore."

The project, tentatively dubbed Penn Centre, would stretch from Maryland to Georgia streets along Pennsylvania. Plans call for as many as six restaurants and a 550-space parking garage.

Allen would not provide a project price, but a local developer estimated the cost would range between $75 million and $100 million.

He plans to incorporate the facade of the historic Omega Building at 29 E. Maryland St. in the project that stretches south to Georgia Street, in front of the Harness Factory loft apartments.

The project also includes air rights over Chesapeake Street, but it excludes a small parking lot at the corner of Maryland and Pennsylvania used by the adjacent Hampton Inn for valet parking. The hotel owners also own that property and refused to sell it to a potential competitor.

Allen has closed on all the other properties.

Since the project is in the Wholesale District, it requires approval from the Indianapolis Historic Preservation Commission. As part of that process, Allen has promised to preserve and renovate the Omega Building facade; he plans to work it in as part of a nine-story structure fronting Maryland Street.

The developer is working with locally based Browning Day Mullins Dierdorf Inc. on final design plans.

Allen also is negotiating with the city for tax incentives. Indianapolis' economic development director, Jim Garrard, confirmed that a property tax abatement is on the table, but said it's too early to discuss details.

"I think it's a great project for that area, and we're excited about it happening," Garrard said.

The entire project, including both towers, would have nine floors in common. The first two levels would house up to six restaurants, ranging from casual to fine dining. The third through ninth floors would be used for parking.

Along Pennsylvania Street north of Chesapeake Street, plans call for a hotel and condo tower that would rise a total of 28 stories, giving downtown's southeast quadrant its tallest building. And south across Chesapeake Street, a 17-story tower would house another hotel.

The two towers would share one level with an indoor pool and fitness area.

For the tallest tower, Allen has applied to Starwood Hotels to run a 240-room Le Meridien. The upscale, traditionally European brand would be a direct competitor to the 241-room Conrad Indianapolis. It would be only the sixth U.S. location for the Le Meridien brand and the only one in the Midwest. A recent weeknight rate at the Le Meridien San Francisco was going for $229.

The hotel would occupy the tower's 10th through 22nd floors. The top five floors would have 64 condominiums, ranging from 1,200 to 6,000 square feet. No price range was available.

Allen is proposing to introduce the Aloft brand as the other hotel. Also a Starwood property, the so-called "lifestyle hotel" brand aims for the feel of a boutique hotel and is a lower-priced offshoot of W Hotels. A recent weeknight stay at a W Hotel in Chicago was going for $299, but no Aloft hotels were available to book.

The Aloft hotel should be a "home run" in Indianapolis, thanks to what should be competitive pricing, said Rob Hunden, of hospitality consultant Hunden Strategic Partners.

But he said the Le Meridien could be tougher to pull off because of its similarity to the Conrad, which also is vying for a shallow base of high-dollar visitors. The Conrad struggled to fill rooms in its inaugural year, with occupancy numbers around 50 percent.

"I would look at the performance of the Conrad in downtown to see if there's a deep enough market for two hotels at almost the exact same size," Hunden said. "We just don't have that deep of a corporate market that can afford that type of a room price."

The hotels also will be up against a flood of new rooms coming on the market, including a 1,300-room hotel project that includes a 1,000-room J.W. Marriott convention hotel.

"It's going to take a few years to rebound for the market to absorb the new rooms," Hunden said.

The restaurant space in the project should be marketable, thanks to a shortage of quality space downtown, said Steve Delaney, a broker with Sitehawk Retail Real Estate who focuses on restaurants.

Chicago-based Hostmark Hospitality Group has been hired to manage the hotels. They would be the firm's first properties under management in the Indianapolis market.

Hostmark Vice President of Development Mark Heisler said more than 100 employees would be needed between the two hotels.

"We love the location, size and scope of the project," Heisler said. "It makes a lot of sense."

Allen hopes that enthusiasm is contagious as he negotiates for city support. The precedent certainly is there. The city contributed $24 million to help build the $100 million Conrad, and recently agreed to give $48.5 million toward the $250 million JW Marriott hotel complex. But Allen's project is more likely to get a tax abatement than a cash investment.

He wants to begin construction this year and finish the work in about 18 months.

"The project has the potential to create a real destination for this side of downtown," he said.

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