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The city of Indianapolis has the go-ahead to set terms and loan the Herb Simon family up to $25 million to help fund a planned $320 million hotel-and-concert-venue project across from Gainbridge Fieldhouse.
The city’s Metropolitan Development Commission on Wednesday approved a resolution for the Department of Metropolitan Development to work with Simon affiliate Boxcar Development LLC on the final loan details and to sign the deal, with a ceiling of $25 million.
The loan could be forgiven, if the developer fulfills “certain conditions over a period of years following completion of the Project,” according to the resolution. The conditions are not outlined in the resolution.
Boxcar’s plans call for redevelopment of the site of the former CSX maintenance building at 230 S. Pennsylvania St. to create a 170-room Shinola Hotel, a 4,000-seat live performance venue operated by Live Nation, an underground parking garage and a skybridge connecting to the fieldhouse.
Boxcar is a holding company for the Simon family, which owns majority stakes in the Indiana Pacers and Indiana Fever basketball teams. A representative of Boxcar said the loan is required to make the project financially feasible.
“The loan bridges a gap faced by developers in this extraordinary environment of high construction costs and interest rates, without which the project would not be viable,” Phil Bayt, senior counsel with Ice Miller LLP, told IBJ. “The timing of the approval of the loan is consistent with other large development projects where sources of equity and incentives must be in place prior to obtaining a construction loan.”
Indianapolis Department of Metropolitan Development spokesperson Lucas Gonzalez said specific details for the loan agreement will be finalized in the coming months.
“The resolution approved by the MDC grants DMD the authority to enter into a loan agreement. The financial parameters of the agreement are outlined in the resolution, and we will now begin drafting the language and negotiate the final terms of the agreement with the developer,” said Gonzalez, chief communications officer for the department.
Bayt said the all-in cost for the project is now $320 million—up from $312 million when the reconfigured plan was unveiled last year.
Herb Simon, who last week retired from his role as chairman emeritus of the Simon Property Group board, has long been one of the wealthiest people in Indiana. Forbes recently estimated his worth at $5.2 billion.
The general parameters of the loan, outlined in the resolution passed by the commission, call for the funds to be taken from the downtown consolidated tax-increment financing district. The funds would be available over a three-year period, including throughout construction of the project.
The resolution also calls for a shared appreciation clause through which the city could reap some financial reward if a refinancing or sale of part or all of the property meets or exceeds a certain threshold.
According to the resolution, the loan funds can only be used for the improvement of property in order to facilitate redevelopment of the site.
DMD Director Megan Vukusich told IBJ on Tuesday that the loan is intended to be uses first for remediating and demolishing the CSX building, which has been estimated at more than $10 million. The underground parking garage also is expected to present costly challenges related to the narrowness of the site, a nearby railway and stormwater management, Vukusich said.
“We’re excited to support a high-quality development that will revitalize the downtown build-environment and breathe new life into a once-deteriorating property,” Vukusich wrote in a statement to IBJ. “The project will include architecture approved by the Indianapolis Historic Preservation Commission, and add a live music venue to downtown Indianapolis, filling a key gap in event space capacity.”
Vukusich added: “The Resolution approved by the MDC grants DMD the authority to enter into a loan agreement. This action is legally required to be completed before we can execute the agreement. The financial parameters of the agreement are outlined in the resolution, and we will now begin drafting the language and negotiate the final terms of the agreement with the developer.”
The project is also set to receive $15.6 million in bond proceeds through a single-site tax-increment financing district that envelopes the property. It is also asking for as much as $29.7 million from the Indiana Economic Development Corp. through redevelopment tax credits, according to a slideshow shared with IBJ, along with $5.6 million from the Capital Improvement Board of Marion County for the skybridge portion of the project.
Construction on the project, designed by Ratio Architects, is expected to begin immediately following demolition of the CSX structure. Interior demolition work on the building already has begun, with the work expected to conclude by early summer. The hotel and entertainment venue are both expected to open by late 2027.
Separate from the CSX project, Simon enterprise Pacers Sports & Entertainment is working with the city to redevelop a portion of the former Marion County Jail I site into a three-story practice facility for the Indiana Fever. While the company would pay the entire $78 million price tag to develop the structure, it’s expected to lease the land through an agreement with the Capital Improvement Board.
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“The loan bridges a gap faced by the billionaire owner of this project that he is unwilling to fill personally. The largesse of the people of Indianapolis is greatly appreciated in this extraordinary environment of high construction costs and interest rates.”
When rates were down developers said the same thing. Billionaires build and everyone else pays for it. As a small fry investor with a couple rentals it feels like a never ending game of musical chairs.
I agree 100%. Im also a small fry amongst the BIG boys. Unless you got BIG pockets and well connected, you’re just on the outside looking in.
Exactly what Simon-backed investment in this city, has gone sour? Answer: none. Not one.
This deal may be unusual but their track record, and their civic posture, combine for an excellent overview.
Evidently: such is the nature of corporate real estate financing in today’s world.
Wow it must be nice to have a city just fork over 25 million to someone who’s already a billionaire.
Hogsett handing over taxpayer money to his chief benefactor.
DMD seems to have rapidly become an agency for billionaire land and tax break giveaways.
Imagine what 25,000,000 would do to fix the pot holes and side walks…
Or for the downtown homeless shelter.
Sometimes you gotta’ think big to be big. Not crazy about giving money and power to billionaires. Wait a minute, who did we just elect President? I’m sure he’ll give little guys a tax break. Sorry about getting a little political here, but that’s how it often works, whether you’re D, R, or I. As for the Simon project, sometime you have to give a little. We’re already getting outclassed by regional competitor cities: Cincinnati, Columbus, Nashville to name a few. Maybe I’m wrong, but there’s a no-pain no-gain element at play here. You may hate and envy the millionaire/billionaire class, but they tend to bring jobs, growth, and other measurable assets to to the table. Just make sure they do.
Where’s Nate’s Flock? Joe B and the boys must be having internet issues. If the company benefiting was owned by Braun instead of Simon the howling would be deafening. This combined with the handout for the Fever’s playpen is over $100M of handouts to Simon.
As always, IBJ, looking forward to the next Focus where Ed Delaney and Kip Tew write columns Democrat splaining how $100M to their biggest benefactor is definitely NOT quid pro quo, but a great use of taxpayers money
Chuck, I already shared my complaints with the Fever project being a poor use of downtown real estate.
It still cracks me up that you find this a flaming liberal rag because the Republican owner isn’t Republican enough. I mean, Ersal Ozdemir gets far better coverage despite ruining thr cities chance of getting an MLS team, and there’s nary a mention of Sardar Biglari running Steak and Shake into the ground … we used to get quarterly updates on how poorly he was doing under previous ownership… what wrong, not what you meant?
Privatize profits and Socialize losses. And the corporate beat goes on.
looking at the total cost of about $320M, before they really get going and have to work on foundations and sewers and such, and the total of anticipated governmental support of less than $100M, it appears the private developer is taking on about 2/3 of the cost. In return for its investment, the City gets a great new facility, another reason for people and performers to come to Indy, and cleans up an eyesore in the immediate downtown neighborhood adjacent to other new development and the basketball arena. Local construcion jobs for a year or so. Permanent jobs, admittedly probably mostly low paying, and a reason for companies to come back downtown instead of Key stone at the Crossing or Carmel by the Cornfield. And ultimately, property tax revenue, plus sales taxes on the hotel stays, the tickets, and all the restaurant sales taxes. Seems like a bargain.
the exactly correct outlook…and the ratios are likely even more stark than you state. Our crumbling, old downtown infrastructure includes sewer and water pipes over 100 years old. That situation doesn’t exist in Carmel, or Fishers. The fixed foundational costs for any developer would likely far exceed $25 million.