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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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