SPEEDWAY, Ind. — Stung by the surprise disclosure of a past federal securities investigation and settlement and the inability of its chosen developer to line up financing, the Town of Speedway is delaying approval of an ordinance to lend $2.5 million to the builder of the anticipated $35-million, 126-room Wilshaw Hotel at 16th and Main Street across from the front door of the Indianapolis Motor Speedway.

Virtua Partners, parent company of developer 33 Degrees Finance and owner/operator of HE Speedway Owner, LLC, reached a $2,000,000 settlement with the Securities and Exchange Commission in 2019 to resolve an investigation into investment self-dealing.

The settlement was first reported by the Indianapolis Business Journal, newsgathering partner of FOX59, which advised Speedway authorities of the financial agreement.

”You guys should’ve seen this yourselves in the first place,” one resident told Speedway town councilors Monday night. “This is your job. This is what you were elected to do.”

The council delayed approval of the ordinance providing the developer a two-to-three-year loan to close a gap in the financing it needs to begin work on finishing the project.

“The market considers it a broken project,” said Town Manager Grant Kleinheinz. “A broken project is a project that at one time started, had construction going, then, for whatever reason, stopped and is now in the situation that it is.”

The shell of the building has been exposed for several years after the original developer ran out of funding and began shopping for another builder to complete the project.

33 Degrees Finance has been delayed in wrapping up its loan agreement.

”We’ve gone out to over a hundred lenders, and we’re still trying to find the right partners to be able to bring in this, but a lot of it has to be with the credit market and lending environment,” said Executive Vice President Nick Montague. “This hotel in particular, it’s less than half built already, so it has a little bit of story behind, and its been challenging to raise the capital for the project.

“The credit markets are very difficult. A lot of lenders that were lending back in 2019 are simply not lending for construction financing. The ones that are are doing so under tighter assumptions, basically lower proceeds for the same project at a much greater cost. So when you put that into a project that costs more than $30 million, those numbers are very, very high.”

The Wilshaw financing delay comes as financial markets have been roiled by the failure this week of two large banks dedicated to crypto lending and financing tech start-ups.

Central Indiana banking experts tell us that large project construction loans should not be affected by the banking industry slump.

”I don’t see a whole lot of evidence that the banking sector in general is cutting off their lending,” said Kristoph Kleiner, associate professor of finance at the Kelley School of Business at Indiana University. ”Things have changed even since Friday. On Friday, there was a lot of uncertainty about what was going to happen, and since then we have seen the federal government step in.”

Central Indiana banks remain strong, said Forum Credit Union Chief Operating Officer Andy Mattingly, though any lending roadblocks are likely related specifically to the Wilshaw project.

”I think this is a unique situation with some of the costs that went into it, how long it’s being developed, and the likelihood that the final loan proceeds needed here maybe probably exceed what most financial institutions can do on a percentage of the total value of the loan,” he said. ”As those costs go up but the value or the income it produces doesn’t go up, then that means you can’t fully fund all that.”

Kleinheinz said the town will continue to vet the background of its developer partner and its parent company and wait for 33 Degrees to firm up its financing before voting on its own loan ordinance.

”I feel pretty good about it,” he said. “If I had to give a percentage, I’d probably say 75-80%, but with some of the changes in the market, that may cause that to drop slightly.”

Kleinheinz expects the developer to confirm its loan by late April, and if the Council approves the ordinance to financially participate with the developer, construction could begin by June 1.