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The developers brought in to complete the long-stalled Wilshaw hotel project in Speedway have filed a foreclosure suit against the property owner, alleging failure to repay a loan.
Indianapolis Mortgage Holder I LLC, an affiliate of Scottsdale, Arizona-based 33 Degrees Co., and Atlanta-based Hotel Equities, is suing Indianapolis firm Loftus Robinson for at least $7.7 million, after the firm allegedly missed a deadline to repay the balance of a loan in January.
Filed in Marion County Commercial Court on Thursday, the lawsuit says Indianapolis Mortgage Holder I is owed $5.83 million for the initial loan, as well as $1.86 million in interest, which continues to accrue at at rate of $2,754 per day.
That loan, secured against the partially built 127-room hotel at the southeast corner of 16th and Main streets, was earmarked to pay construction firm F.A. Wilhelm Construction, according to documents supporting the lawsuit.
F.A. Wilhelm in 2019 filed a lien against Loftus Robinson alleging the company had failed to pay for about $4.5 million in construction services on the project. The lien was released after Loftus secured the loan in mid-2020.
The Wilshaw development, which carried an estimated price tag of $36 million a year ago, has seen little progress since mid-2019 after Loftus Robinson encountered funding problems. Loftus Robinson signed an agreement to develop the hotel in 2016 with an original expected completion date of 2020.
33 Degrees and Hotel Equities formally announced in November 2021 they would take over the project. Even so, little movement has occurred in the interim, as the new developers have also struggled to secure adequate funding.
Officials with the town of Speedway, which is not named in the lawsuit, said they are “carefully monitoring” the situation and in communication with 33 Degrees on the matter.
“While 33 Degrees’ legal action is related to a transaction involving private entities, the site sits at an iconic intersection in the heart of our town,” Speedway officials said in a written statement. “We have a stake in what is ultimately developed there and are committed to being proactively involved in the outcome. Although the Town is not a party to 33 Degrees’ foreclosure action, we have not ruled out legal action to protect the town’s interests..”
The town in early 2023 said it was considering a $2.5 million gap loan to help with completion of the project. But after IBJ reported on an undisclosed Securities and Exchange Commission violation for 33 Degrees, the town delayed a decision on the matter to conduct further due diligence.
Speedway officials now say the town won’t move forward with the loan “given current market conditions and the pending legal action,” but did not rule out offering the loan or other economic incentives down the road.
As part of the foreclosure suit, the developers aim to take title to the Wilshaw property, which carries an obligation to move forward with the hotel project. Any changes to the project would have to be approved by the town due to an existing development agreement which is currently held by Loftus Robinson, but assigned to 33 Degrees and Hotel Equities.
The lawsuit requests full repayment of Loftus Robinson’s debt, or the foreclosure of the property and subsequent sale by the Marion County Sheriff. 33 Degrees and Hotel Equities could acquire the property as part of a sheriff’s sale.
“We hope that the foreclosure will be resolved quickly, allowing site redevelopment to continue,” town officials said. “It’s our understanding from the court filing that 33 Degrees wants to take title to the hotel parcel of property with the current development obligations to the town still in place, meaning the town would need to approve any changes to those obligations.”
Representatives for Loftus Robinson and Hotel Equities did not return messages requesting comment.
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Embarrassing for all involved, this disaster will linger for another 3-5 years and continue to be an eyesore
The same thing will happen with the proposed Kimpton Hotel at Pennsylvania and Washington St. downtown. Loftus Robinson was supposed to be developing that and nothing has been done in at least two years if not longer. That’s a shame because Kimpton is a good brand to have.
First, aren’t these ‘developers’ vetted? Why aren’t they required to post some sort of serious security $ before being given the green light (pun intended). The pathetic irony flys in the face of all of the positive development on Main. I would hope that a hotel named for the guy that essentially, along with Tony Holman saved the place after WWII. RP has to be fully aware of this ridiculous situation. It would be great for everyone for him to decide on a legit builder and write a check. This place would do nice business year around. For May, it would be booked 100% at a premium rate. To me, it’s a no brainer.
I was on the board of a local CDC several years ago. It was a pretty small operation, but it is so easy to get into cash flow issues when the first burp happens. If you don’t have just a little discipline or integrity to keep from spending the cash on hand on the next big opportunity (because it will make you even more quick cash) then you will crash and burn the first time you hit a significant bump. It will cascade to all of your other projects like a collapsing Ponzi scheme.
If these are not public companies, then the only scrutiny is from banks doing the lending, and a former President has show how easy that is to manipulate even on a much bigger scale.
what mess
I think RP is too smart to get involved.
Or Penske just waits until it’s abandoned, and then steps in, scoops up the land and whatever work has been done for pennies on the dollar, finishes the project and then makes a tidy profit on it. All while saving the reputation of the Town of Speedway and the IMS.
If having a hotel that close to the Speedway made business sense, the Hulman-George family wouldn’t have closed the Speedway Hotel… and I suspect Penske, if they wanted to go that route, would do so with the land they already own to the south of the Speedway.
https://www.ibj.com/articles/penske-buys-key-parcel-across-from-speedway-with-plans-to-rethink-tracks-front-door
The Speedway Hotel was outdated, and not a business draw. It was too close to the track. Using your own land to build a hotel doesn’t make you look like a saviour. This project pre-dates Penske taking over the track. It’s an eyesore for him as much as anyone else. Once it collapses, he’ll step in, or arrange for someone to step in, and finish it. I suspect IMS will step in, and contract with developers and a management company. Or not, and make a nice parking lot
Penske Entertainment has their hands full with IMS and IndyCar and running an ever increasing number of events. I don’t see how getting into the hotel business helps them, and I think the town of Speedway has more at stake than IMS. I suspect IMS would help the city if asked, but I doubt they want any larger role in any such project. Just my two cents.
After this fiasco and the city of Indianapolis taking over ownership of the hotel under construction at Pan Am plaza I sincerely hope that our local leaders will do a much better job of vetting these developers in the future. Saying you have the resources to do something and proving it are two different things!