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Property Lines

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Real Estate & Retail

City's aid on $95M downtown hotel project would shift risk to developer

February 16, 2017

City leaders are willing to provide incentives for a $95 million, 15-story downtown hotel project, but not through traditional tax-increment financing assistance.

Penn Center rendering 250pxThe Metropolitan Development Commission on Wednesday approved establishing a site-specific TIF district for the 316-room dual-brand hotel (see image at right), which would be developed by New Orleans-based HRI Lodging LLC on a surface lot across from Bankers Life Fieldhouse.

The site fronting Pennsylvania Street north of its intersection with Georgia Street is not already located in the Downtown TIF.

The city will issue $17.6 million in bonds, based on the tax increment expected to be generated by the project, to fund development of a 382-space parking garage. But the developer, not the city, is responsible for the difference through a developer-backed bond, if for some reason the increment doesn’t cover the the city's debt payments on its bonds.

The city employed the same strategy to help finance an $18 million mixed-use project in Fountain Square, and in general is turning more to developer-backed bonds to shift the risk onto developers rather than the city.

The downtown hotel project is particularly difficult to finance without some sort of assistance, the developer and city argue, because the property “is encumbered with a perpetual easement” that provides Harness Factory residents access to the garage and exclusive use of 74 parking spaces on the property free of charge.

HRI is in the process of purchasing the property from owner Greg Allen. Other developers twice have attempted in the past decade to build a hotel on the lot.

In 2014, Minnesota-based CSM Corp. pitched to the Indianapolis Historic Preservation Commission a 15-story, 286-room two-flag hotel with underground parking. The company had agreed to buy the parcel from Allen to build the hotel with two brands—an Aloft and an Element—but withdrew its plans before receiving a final hearing from IHPC.

In 2007, Allen attempted to develop the site himself but was derailed by the recession. His plans called for two hotel towers—one 28 stories, the other 17.

The project, dubbed Penn Centre, would have featured as many as six restaurants and a 550-space parking garage while also incorporating the facade of the historic Omega Building at 29 E. Maryland St.

Roughly 14,000 square feet of retail space would be included in HRI’s project, which also would incorporate the vacant Omega Building.

HRI executives first pitched their project in October to IHPC without its making a recommendation, in what’s called a preliminary review.

HRI hopes to return to the IHPC in March. Patrick Vyncke, HRI’s director of acquisitions and development, declined to comment on the project before officially presenting to IHPC.

But he told MDC members that “we love the location” and that the proposed hotel “fits great” on the site. The architect on the project is Ratio.

HRI Lodging’s portfolio includes 19 hotels and resorts in the United States sporting brands such as Starwood, Marriott, Hilton and Hyatt. HRI Lodging is the hotel management division of HRI Properties, a full-service real estate development firm.

 

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