March 28–The city is done waiting for 21c Museum Hotels to hold up its end of a $55 million deal to build a boutique hotel and art gallery at the site of Indianapolis' old City Hall.

After more than two years of planning, the city will restart the process to search for projects for the 112-year-old building at 202 N. Alabama St. with a loose goal of selecting one this summer.

"The last few weeks (21c) made it clear to us there was really no foreseeable way for them to be able to begin construction in 2017 or even 2018," Mayor Joe Hogsett's chief of staff, Thomas Cook, said. "We really have enjoyed working with them. They were incredibly cooperative with us. We really did enjoy the plan that they put forward."

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The Louisville, Ky.-based company and the city reached the deal at the end of 2015 under former Mayor Greg Ballard's administration with plans to begin construction in 2017. 21c would invest $29 million to close on the property by June 2016, and the city would have footed the rest from millions of dollars of public incentives: a federal historic tax grant, TIF district funds, a federal loan, money from the Central Indiana Community Foundation and a city-backed loan.

21c is known for its edgy, sometimes over-the-top design, anchored by unique, statement-making artwork and restaurants that make most foodies swoon. The company gravitates toward historic buildings in disrepair, and the proposed Indianapolis hotel would have been no different.

"These types of projects are extremely complicated, and as we got further into the process, it was evident that there was going to be more funding needed, from both the city and from 21c Museum Hotels, in order to complete the project," President of 21c Museum Hotels Craig Greenberg said in a statement. "We've worked diligently with the current administration for more than a year to make this project a reality but were ultimately unable to reach an agreement on terms that would allow this project to move forward."

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The June 2016 deadline came and went. 21c was unable to provide the financing but had been in close communication with the city on its delayed funding, Cook said. The city, meanwhile, had been making payments on the outstanding $9.1 million city loan.

"They were supposed to be making the payments on the loan, and because they had never closed, we were doing that," Cook said. "The city was in essence in keeping this project alive. They weren't really in a position to move forward in the project in the way that it was papered up with the previous administration."

The Hogsett administration informed 21c late last week that the city was moving forward with a request for proposals for the site. Because the hotel never materialized, Cook said the liabilities for the city are minimal. The city loan was paid using loan funds, and the bank will be able to accept the loan back without penalty, Cook said. It's unclear if that would include reimbursement of any interest paid. The city said it is still working out details with the lender.

The costs to set up the deal in 2015, however, won't be recouped. That amount is somewhere between $500,000 to $1 million, Cook said, and went to attorneys, consultants and transaction costs.

"We've really done everything we can to make the city whole, which is essentially why we're doing this now," Cook said.

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Cook said the city hopes 21c will view this as an opportunity to resubmit the proposal, but at the very least, the detailed mock-ups of a lavish museum hotel with an art gallery and restaurant set the bar for what is possible at the site.

"Obviously there's proof of concept that a hotel would work there, but we want to use maximum leverage in the development community," he said.

Greenberg said 21c Museum Hotels would not resubmit a bid but is still looking for opportunities to build in Indianapolis.

"We have worked closely and collaboratively with the city of Indianapolis over the last few years, and at this point, they know what we believe is needed in order to move forward with the project," Greenberg said. "We will not submit an RFP during this new bid window."

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Founded in 2006, 21c operates boutique hotels in Louisville, Cincinnati, Durham, N.C., Lexington, Ky., Oklahoma City, and Bentonville, Ark., with two more locations on the way, according to its website.

City offices moved out of the old City Hall building in the 1960s. The building served as the Indiana State Museum for more than 30 years. From 2002 to 2007 the building was the interim Indianapolis Central Library while the main library was expanded. In February, the Indianapolis Historic Preservation Commission designated the building a historic landmark.

The distinction comes with safeguards to preserve the historic appearance and alleviates some of the responsibility from the city to protect it. This, Cook said, could allow the city to hand over the reins to a private developer.

"We think that part of town is in an even better position than it was two years ago in terms of marketability," Cook said. "We're going to be opening doors, not closing them. If anything, we're in a better position to go out and find a partner for Old City Hall."

Call IndyStar reporter Amy Bartner at (317) 444-6752. Follow her on Facebook, Twitter, and Instagram.