The all-in cost for the redevelopment of Pan Am Plaza is now expected to be $751.6 million, according to documents related to the city’s plans to sell $591.8 million in bonds this week for the hotel-and-convention-space project.
The redevelopment project includes the planned 40-story, 800-room Signia by Hilton hotel and a $250 million expansion of the Indiana Convention Center. The latter component will add 143,500 square feet of space, including extensive pre-function space and a 50,000-square-foot ballroom. The project also calls for an enclosed skywalk connecting the addition to the existing convention center space across Capitol Avenue.
Previous estimates from the city pegged the total cost of the redevelopment at anywhere from $710 million to $800 million.
Details on financing the project have been revealed in a 732-page document prepared by the Indianapolis Local Public Improvement Bond Bank and the city, ahead of the pair taking to market $436.8 million in municipal bonds. Proceeds from the sale of the bonds will go toward building the Signia, whose total cost is expected to be $499.1 million. (The figure includes more than $30 million in reserves held for cost overruns and unforeseen circumstances.)
The city expects to issue another $25 million in bonds for the hotel at an unspecified date. And Hilton Worldwide Holdings Inc., which will manage the Signia hotel, has pledged to contribute $39.7 million toward construction of the hotel.
The city will be responsible for paying off the bonds, with interest, over dozens of years. The city plans to use revenue generated by the hotel to pay off the debt.
A city-commissioned study conducted by New York City-based LW Hospitality Advisors projects the hotel will generate about $50.6 million in room revenue during its first year, with an occupancy of around 67%. By the fifth year of operation, it’s expected the hotel will be operating at 77% occupancy and generate about $72.3 million in revenue.
Any revenue above the cost of operating the hotel is expected to go toward paying off the bond debt.
The bonds are expected to be made available for purchase Wednesday, through a series of offerings at $200 million, $184.6 million and $52.2 million. An interest rate for the bonds is expected to be finalized Wednesday morning.
The bond terms are expected to range from 34 to 44 years.
The construction timeline for the hotel has also changed, according to city filings, with completion set for Oct. 15, 2026 rather than earlier in the year, as previously expected. There are also financial incentives built into the city’s contract with the development team for finishing as much as 60 days earlier than that date.
The bond sale marks a significant step forward for the Signia project, which the city took over in May after Indianapolis-based developer Kite Realty Group Trust said it was unable to secure favorable enough interest rates for the hotel to justify financing the project itself.
The City-County Council in June approved a measure allowing the city to take out up to $625 million in bonds—including financing costs and reserve funds—to build the hotel at the southwest corner of Georgia and Illinois streets.
As part of the bonding process, the city secured a BBB- rating from financial rating agency S&P Global, previously known as Standard & Poor’s. The rating indicates the agency believes the city will be able to meet its financial obligations related to the project, but present a moderate risk to investors.
The city’s overall credit rating remains high—AA or better—from S&P and other agencies.
Construction on the project is already underway, using funds already allocated for the project by other government agencies. While most of the work being done now is infrastructure related, both the hotel and the convention center expansion have received full design approval from the city, meaning vertical construction can begin once sub-grade work is done and the remaining funding is finalized.
In addition to the bonds for the hotel, the city is also planning to sell $155 million in downtown tax-increment financing bonds on Thursday for construction of the convention center expansion. Those bonds are expected to fully mature in 2048.
The so-called TIF bonds are expected to be repaid via property taxes generated by properties in the city’s Downtown TIF District.
The expansion of the convention center is expected to run $250 million. The city’s Metropolitan Development Commission and the Marion County Capital Improvement Board have agreed to cover the balance of the cost, after taking into account the bond funds.
The city in June acquired the 3.1-acre Pan Am Plaza property from Kite Realty Group for $54.3 million. Kite remains involved in the project as a development partner—it will collect $13.7 million for the development, in addition to what it received for the land—but the company won’t have an ownership stake once the project is completed.
The expansion is the first since 2011, when the JW Marriott was built. City officials have said the development is necessary to ensure Indianapolis stays competitive with other major convention cities. Already, the project has helped secure long-term renewals from several existing convention clients, like Gen Con and the National FFA Organization, as well as agreements with new convention presenters such as the American Dental Association.
The study by LW Hospitality Advisors generally concluded the Signia will not decrease business at other downtown hotels.
Several hoteliers have taken issue with the city’s planned ownership of the property out of concern it could put them in direct competition with local government on room rates and for guests—particularly since local tourism promoter Visit Indy has been so heavily marketing the hotel for would-be travelers and new events.
The average rate for the first year is expected to be $259 per night, increasing to $322 by year five.
The general contractor for the project is AECOM Hunt and Ratio Design is the architect.