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The city of Indianapolis plans to pay Kite Realty Group Trust nearly $55 million to acquire the firm’s holdings at Pan Am Plaza, part of an effort announced last week to move ahead with the redevelopment of the property with an expansion of the Indiana Convention Center and a new upscale hotel.
The city next Wednesday will request authorization from the Metropolitan Development Commission to spend $54.3 million on the 3.5-acre property at the southwest corner of Georgia and Illinois streets. The figure is roughly 83% more than two independent appraisals determined to be the fair market value for the property—about $29.6 million.
The property purchase is separate from a deal the city announced last week to take over financing for the redevelopment of Pan Am Plaza.
Control of the site would allow the city to move forward with a redevelopment of the property with an 814-room Signia by Hilton hotel, which would be paid for by using up to $625 million in tax-exempt municipal bonds secured against revenue generated by the property. The 40-story Signia is part of a larger redevelopment of the Pan Am block that is to include a $200 million expansion of the Indiana Convention Center.
As part of the deal, the city would also be assigned rights tied to various contracts for the redevelopment project, including rights to develop the property, as well as a design agreement with Ratio Architects and a construction management agreement with AECOM Hunt.
The city is already requesting approval for the bonds from the City-County Council, with the council’s Metropolitan and Economic Development Committee expected to hear the matter on Monday.
The shift comes after Indianapolis-based Kite Realty Group determined it wasn’t able to get favorable enough interest rates on the private market to move ahead with securing financing for the project. The firm has spearheaded the redevelopment since the concept was selected in 2018.
Now, the city will pay for the project, with the hotel expected to surpass $510 million and the expansion of the convention center set to cost about $200 million.
“In order to use public financing to complete the Signia Hotel project, the city must buy the land on which it will be located,” the city said in a written statement to IBJ.
The city said Kite would remain the developer, and the city would be sole owner of the building upon completion.
Kite has owned Pan Am Plaza since 2008, when it acquired the site for about $4 million in partnership with Sacramento, Calif.-based Coastal Partners LLC from the Indiana Sports Corp, according to county property records; it spend another $5 million to acquire other portions of the site later on. The company also spent $30 million to buy the underground parking garage at the corner of Capitol Avenue and Louisiana Street in March 2019—a critical component for moving the redevelopment project forward.
Kite’s holdings do not include the Pan Am Tower office building, which is owned by Carmel-based Lauth Group.
The city is typically required to order two independent appraisals of property it has interest in purchasing, with the average of the two being the amount it can offer as a fair-market purchase price. But because the appraisals for Pan Am Plaza, conducted by Indianapolis firms Terzo & Bologna, Inc. and Integra Realty Resources, came in far below what Kite paid for the property, city officials requested a reprieve from those standards to allow for a higher purchase offer.
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Makes you wonder what Kite could have sold the property for (without Indy paying a grossly higher value)?
Good point.
Complete and total BS!!
“The city is typically required to order two independent appraisals of property it has interest in purchasing, with the average of the two being the amount it can offer as a fair-market purchase price. But because the appraisals for Pan Am Plaza, conducted by Indianapolis firms Terzo & Bologna, Inc. and Integra Realty Resources, came in far below what Kite paid for the property, city officials requested a reprieve from those standards to allow for a higher purchase offer.”
“The figure is roughly 83% more than two independent appraisals determined to be the fair market value for the property—about $29.6 million.”
We need to replace the entire City-County Council.
With increases in property values since 2008 and 2019, the $34 million spent by Kite would be significantly more today (maybe not $54 million, but likely to be at least in the high $40s). When the other contractual agreements (especially architectural and construction) are taken into account, $54 million may in fact be about right.
Brent – agreed
So the two appraisals came in far below the value of what Kite Reality
paid for the property, the City decided decided for a reprieve
to pay a higher price????
Sounds like the market value was not up to Kite’s desired amount.
So what was the fair market value of the two assessments??
Kite invested $ 34 million dollars five years ago and now is walking away with
$ 54 million??
Given that the demand for download real estate is not what it was since Covid,
was the $ 54 million an over payment. A high over payment??
In what world does the city allow any entity who is receiving funding from them to purchase property at 83% more than the appraisal?
In Indianapolis, that’s where. Kite has been digging into city coffers for decades. Nothing new here.
Somebody/company will offer the city way more than what it cost to build it once it’s built. It’s gonna be a Destination Spot for sure.
Nice job, Micah. GREAT IMPROVEMENT. Keep up the good work.
Maybe the City should condemn the property, pay Kite a fraction of the proposed amount, and bid that sham of a developer “adios” and fare the well!
That’s a GREAT idea. Cannot stand Kite anymore. They screw Indy every chance they get. Let them leave.
Kite is a successful REIT with a long standing history of maintaining its headquarters in Indianapolis. This despite having opportunities to relocate to states like Florida or Texas. They have contributed much in terms of economic growth and employment to Metro Indianapolis and the State. IMO this project may have moved forward years ago in a favorable funding environment had not local hoteliers sought to derail this important project fearing the competition. I applaud the City for now facilitating this addition to Indianapolis.
Rick C
Let them leave. They’ve screwed Indy many times. Indy paying them 20 million more than what they paid for it? Something stinks here. FIRE KITE FROM THIS PROJECT. Shame on them for fleecing Indy on this. Oh yeah, great hometown company. If and when they do leave, good riddance.
And it costs the city $54,000,000.00 to keep them here, after this failure by Kite? You do agree that, as a REIT, Kite failed in this instance. Please tell me in what way this proposal benefits the City more than it rewards Kite for… maneuvering.
FIRE KITE FROM THIS IMPORTANT PROJECT. They certainly do not deserve the opportunity to manage this project.
I certainly do NOT agree that as a REIT Kite failed in this instance. Companies, including Kite, and banks are having to operate in an environment of high inflation and rapidly increasing interest rates. Financing growth in this environment is a general problem.
The other hotels are complaining but not offering an alternative if the Pan Am project isn’t built. One things for certain, the 3 major conventions signed on to stay in only if the hotel and convention expansion is done. Atlanta and Orlando both financed their Hilton Signia’s the exact same way indy is planning to. The city is actually at a point of no return to be honest. If the city doesn’t follow through, every hotelier that’s against the project will suffer in the long run. I understand they feel they’ll be at a disadvantage because the city will own the Hilton but conventions help feel the rooms, without this project, indy will pass the torch to a peer city and will never regain the momentum it has. Remember, folks laughed when Indianapolis built the Hoosier dome without an NFL team. Now look where indy is on the national stage. Can’t rest cause our peers are waiting for the opportunity to snatch the moment from Indy.
So, build it and they will come? If the private sector can’t make sense of a development doesn’t that tell you something? Union Station, Circle Center? See any patterns here???
City will be shelling out a $Bil by the time both projects are completed. What is the plan for public safety component of downtown and Marion County? Getting the human sacrifice under control and a more robust backing of IMPD should be the A#1 priority of city “leaders”.
Get the house in order, revisit in 5 years.
I applaud the actions! Need to move on and compete with cities our size for convention business. Those haters who complain about the state of our city, imagine if we don’t move on with this major hotel, Indy will become Naptown again (70s style)! Mayor Hogsett and company did the right thing. The other running mate mayor (sorry can’t pronouce his name), who is Republican and a Millionaire, can’t do any better!
Stephen S. ~ 100 percent correct (just as I commented above even though I never went to Business School)!
The REAL cost to the City is likely only a few million. “Only”, due to the overall importance of the project. This should be thought of as core financial infrastructure for the city’s hospitality and event industry. Contrast with subsidies to the biggest companies in the city. It’s a prudent and smart move.