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Pyramid Advisors and the Morgan Stanley Real Estate Fund
 Spending $6.5 million to Convert the Adam's Mark Hotel
 & Suites in Indianapolis to a Hilton

By J.K. Wall, The Indianapolis Star
Knight Ridder/Tribune Business News

June 9, 2004 - New owners at the Adam's Mark Hotel & Suites Downtown are about to make a $6.5 million bet that they can score more business travelers willing to pay more for their rooms.

Officials at Boston-based Pyramid Advisors and the Morgan Stanley Real Estate Fund, who jointly purchased the Downtown Adam's Mark in December, want to raise the hotel's average room rate per night to $130 to $140, up as much as 22 percent from the current $115 average.

To do this, Pyramid and Morgan Stanley plan to change the hotel to the Hilton brand in August, upgrade its 332 rooms, renovate the lobby, light up the exterior and add a second restaurant. The renovations should be complete by year's end.

Such a renovation is a standard way to boost prices, said Robert Mandelbaum, director of research for the Hospitality Research Group of PKF Consulting in Atlanta. Given the recovery that began to take hold among hotels late last year, he said, the Hilton Indianapolis might be able to pull it off.

A study by PKF predicts that rising occupancy will lead to roughly 3 percent jumps in room rates in both 2004 and 2005. Another study by PricewaterhouseCoopers, released this week, forecast similar increases.

"They are catching the industry on an upswing," Mandelbaum said.

Pyramid's strategy is to buy low-performing hotels in good locations. It then tries to improve their business with large capital investments. The Adam's Mark maintains an occupancy rate of just over 60 percent while its peer hotels in Downtown Indianapolis have occupancy rates of more than 70 percent.

Pyramid bought the Adam's Mark in Indianapolis as part of an eight-hotel, $236 million deal with HBE Corp. of St. Louis. Pyramid will operate the Indianapolis hotel as a franchise of Hilton Hotels Corp., based in Beverly Hills, Calif.

Pyramid hired Bill Stanton, former general manager of The Westin Indianapolis, to position its hotel as a high-end option for business travelers in Downtown Indianapolis. Hilton Indianapolis will have less of an emphasis on booking business from major conventions than such hotels as the Marriott Downtown, The Westin and The Hyatt Regency.

Yet the new owners also want to avoid head-to-head competition with the pricey Conrad Hilton, a 243-room hotel being built at Illinois and Washington streets. Its developers predict room rates will cost $175 to $200 a night when it opens in 2006.

Those two Hilton products will join the Hilton Garden Inn, which opened in December, to bring the Hilton name back to Indianapolis. The city had Hiltons on Monument Circle and near Indianapolis International Airport until 1993. They were sold and converted to Ramada Inns.

The money spent on the Adam's Mark renovation is significant, particularly since the hotel opened just four years ago.

"I really didn't pay any attention to this hotel" after it opened in 2000, Stanton said. But now Stanton touts the Adam's Mark's 215 suites, 30 of which are spacious units with bedrooms and living rooms. "We're going to more aggressively pursue the corporate business traveler," he said.

The lobby will receive the lion's share of Pyramid's attention and money: roughly $5 million. Instead of an entrance that now opens right in front of Deco, a 250-seat restaurant, it will construct a corridor that leads directly to the check-in desk and gives the Hilton Indianapolis a "sense of arrival," Stanton said. Couches and chairs will provide a meeting point for guests, which the hotel now lacks.

Arched glass windows on either side will look into the hotel's two restaurants. The hotel-operated restaurant, Deco, will shrink to 180 seats and offer foods indigenous to the Great Lakes region. A national chain restaurant and bar, along with a Starbucks Coffee store, will fill the corridor's left side.

Stanton joined Adam's Mark last month, after spending 6{1frac2} years at the helm of The Westin. He said he left because he no longer wanted to work for a large corporation. New York-based Starwood Hotels & Resorts Worldwide Inc. owns the Westin Indianapolis.

The 573-room Westin became one of the city's three "headquarters" hotels that host a significant number of delegates during major conventions.


--Location: 120 W. Market St.

--Opened: Spring 2000

--Sold: December 2003, to Pyramid Advisors and the Morgan Stanley Real Estate Fund

--Name: Will be renamed Hilton Indianapolis in August 2004

--Adam's Mark occupancy: More than 60 percent 2003

--Downtown average occupancy: 59 percent*

--Adam's Mark average room rate: $115 2003

--Downtown average room rate: $101*

* Includes data from Eastside hotels; data provided by Smith Travel Research

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