Developer attributes continued delays on Speedway hotel project to pandemic

Ongoing delays to Speedway’s high-profile Wilshaw hotel development continue to flummox town officials, as the project’s work stoppage nears the one-year mark.

Construction has been stalled on the planned 126-room hotel at the southeast corner of Main and 16th Streets since July 2019, while Indianapolis-based development firm Loftus Robinson LLC has tried to shore up financing.

The firm attributes the latest delays to the COVID-19 pandemic, writing in an April 16 letter to town attorney Dennis Otten that both the economy and the state’s stay-at-home order have affected the project, even though construction has generally been permitted as an essential activity.

The virus has led to “major disruptions in all markets, including financial, labor and construction markets, which are all outside of the developer’s control,” the letter said.

Loftus Robinson has generally resisted the town’s requests for specific information about the Wilshaw’s status, also failing to meet deadlines in a proposed catch-up plan. The town asked in early April for financing to be secured by April 24, with work resuming by May 1. Neither goal was met.

“As there are still many unknowns about this global pandemic, developer is uncertain as to the extent of this delay, but developer remains committed to continue to keep the town informed of its progress and will finalize the catch-up plan at the appropriate time when these governmental regulations are relaxed and the effects of this pandemic have settled,” said the letter, sent by attorney Jeffery Dack.

Drew Loftus, principal of Loftus Robinson, declined to comment on the project.

Speedway Economic Development Director Tim Gropp said he didn’t believe the project’s current issues could be completely pinned on coronavirus, although he acknowledged the pandemic has been disruptive. The Wilshaw project has been stopped for nearly one year, he said, while COVID-19 has only affected the Indianapolis area directly for the past two months.

The project mostly halted in early July, after Loftus Robinson failed to secure the first portion a $21.1 million construction loan from Lake City Bank. The bank required the company to meet additional funding obligations—including putting more equity into the project or finding investors—but Gropp said that has evidently not yet occurred.

“It’s the same issue they’ve had for a year, so they’re clearly not able to resolve it from our standpoint,” he said. “We’re now at a spot where we’re working directly with all the partners to try and find a solution.”

Speedway attorney Otten agreed, writing in response to the firm’s letter,  that while “the town appreciates and takes seriously the impact of the COVID-19 pandemic, it does not agree with the assertion that the COVID-19 pandemic forms a basis … to excuse performance by the developer.”

The city has a major role in the partially-completed development, because the project is supported by developer-backed bonds that will be repaid through tax-increment financing measures—a tool often used by municipalities as an incentive.

The first phase of the overall $36 million development, an apartment structure along Main Street, was completed by Scannell Properties in late 2018.

Loftus Robinson’s biggest challenge appears to be financing, said Gropp, as it has still not secured the funding it needs to restart the project and continues looking for investors. Public records indicate no new loans have been recorded for the project.

Gropp said it’s unclear if an unnamed investor that had been brought in earlier this year is still involved in the project.

“They’re talking to investors and we’re still sending them potential investor contacts,” he said. “We’re doing everything we can to find find a path forward, whether that’s finding a partner or finding an investor, and trying to figure out out who could put the money in or back it to get things moving again.”

Gropp said ongoing delays make it “highly unlikely” the hotel will be completed by the Jan. 27, 2021, deadline set in the economic development agreement. That would leave Loftus Robinson and Scannell on the hook to service the bonds on the project when they start becoming due in January.

The project agreement does not permit construction delays of more than 180 consecutive days. It’s been more than 300 days since significant work last occurred on the project, the town claims.

This is the second time the hotel has been substantially delayed, as construction was supposed to begin in mid-June 2018 but did not start until March 2019—a delay of nearly 270 days. Infrastructure work occurred during that time while Loftus Robinson sought financing.

The only activity that has occurred on the site is a survey of the existing structure in March, to ensure the project would not have to begin from scratch. He said the results of the survey were “positive,” but he hasn’t seen any activity on the property since.

Gropp said town officials are “extremely frustrated” by the Wilshaw situation, but acknowledged it would not be feasible to cut Loftus Robinson out of the project entirely.

Loftus Robinson has said repeatedly it is still committed to the project. So is Hilton, which would carry the hotel flag for the Wilshaw.

“It’s very complicated project,” Gropp said. “There’s a lot of moving parts, so we can’t just get them out of it, but we have to let them know that we are actively pursuing any option. We can’t just push Loftus Robinson out—they have to be at the table. All we can do is present options.”

The town has regular communication with the developer and Scannell, as well as general contractor Wilhelm Construction—which is still owed about $4.5 million in back pay for work on the hotel through last October.

In addition to finding additional investors, the town could look to bring in a new developer to accompany Loftus Robinson on the project or compel the firm to adhere to a new catch-up plan.

A legal route potentially cutting the firm out of the development also is available, but Gropp said it’s a last resort since it would likely lead to even greater delays in construction.

“We obviously are keeping all our options open—one of those being the legal path,” Gropp said. “It’s just not a very advantageous path necessarily at this time. There are better paths forward. But we all understand that the clock’s ticking on this.”