The Indianapolis City-County Council on Monday night unanimously passed a proposal to give $16.7 million in financing help to Keystone Realty Group for the developer's $141 million plan to revive two high-profile downtown redevelopment projects.
As IBJ reported Sept. 14, Keystone’s plan calls for a $61 million redevelopment of the historic Illinois Building at 17 W. Market St. into an Intercontinental Hotel and an $80 million transformation of the former AT&T 220 Building at 220 N. Meridian Street into an office, apartment and retail building.
The proposal tht passed Tuesday allows the city to issue $16.7 million in “bond anticipation notes,” which work similarly to bonds but are anticipatory short-term securities issued under the assumption that the city will issue actual bonds within five years. The city anticipates issuing about $17.5 million in developer-backed bonds to finance the project.
The projects, which are both located in the consolidated downtown tax-increment financing district, would use 80 percent of the tax revenue generated by the projects to pay off the bonds, which last for a period of 25 years.
If the project fails to generate enough tax revenue, the developer is on the hook.
“If there’s not enough increment to pay, it’s our responsibility for us to fill that gap,” said Chris Carriere, director of finance for Keystone Realty, previously told the council’s metropolitan and economic development committee.
The projects would continue to bring in tax revenue to the city during the life of the bond. The Illinois Building currently generates about $420,000 per year in tax revenue, primarily because of the 2016 additions of Giordano’s and Hyde Park Prime Steak House to the ground floor. The AT&T 220 building generates about $120,000 per year for the city in tax revenue.
When the improvements are finished, the city anticipates receiving an additional $341,000 in annual taxes from the buildings, even during the time that the developer is paying off the bonds.
Department of Metropolitan Development staff members have previously stated the projects together would create 700 temporary construction jobs and 753 permanent full-time jobs while providing a "higher and better use" for two properties that have been of "limited contribution to vibrancy in the Mile Square." The permanent jobs will have wages of at least $12 per hour.
Thomas Cook, chief of staff to Mayor Joe Hogsett, told IBJ that Keystone officials have “been chomping at the bit” to start working on the project as soon as they receive needed approvals.
“Both the Illinois Building and the AT&T building are in a part of downtown that’s doing well, but they are largely vacant structures and that doesn’t benefit the city,” Cook told IBJ. “For that corridor, it’s a really big deal to have some momentum on that end of downtown.”
The projects represent a huge bet on downtown by Ersal Ozdemir, 44, Keystone's founder and CEO, a native of Turkey who got into the construction business after receiving a civil engineering degree from Purdue University in 1997. Ozdemir, one of central Indiana's most prominent developers, also owns the Indy Eleven professional soccer team.