City unlikely to reap convention hotel profits

December 26, 2007

City officials have agreed to pay $48.5 million of the $300 million cost of building a 1,000-room JW Marriott hotel in downtown Indianapolis, but a profit-sharing agreement that is part of the deal isn't likely to yield payments for the city, a hotel industry expert said.

Developers of the convention hotel signed a final deal with the city Dec. 20. The contract calls for the city to receive 25 percent of adjusted profits-but only after the developers make at least a 16 percent return on all development costs.

That means the developers, Merrillville-base White Lodging Services and Indianapolis-based REI Real Estate Services, can cover their expenses and make about $48 million in profit before passing anything along to the city-a situation that certainly won't occur anytime soon, if ever, said Rob Hunden, president of Chicago-based hotel consultant Hunden Strategic Partners.

"It's a nice gesture," but probably only a gesture, he said of the profit-sharing requirement.

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