Redevelopment officials are encouraging the owners of Carriage City Plaza to find another hotel flag and retail tenants or sell the property to someone with hotel experience after Hotel Indigo shut down last month.

Redevelopment Director Peter Pelissier said Joe LoMonaco of New York City-based LV Holdings, which oversees 80 E. Milton Ave., LLC, was advised that the Redevelopment Agency would not agree or recommend to City Council to convert the hotel into residential units. Any change to the space would require the agency’s approval. LoMonaco was encouraged to “solicit for other hotel flags, aggressively attempt to rent retail space or put the available property up for sale to some entity that has experience with the management of hotels,” Pelissier said. “It’s a shame that this had to happen. The rentals of the existing units appear to be a positive for the property,” he said.

Meanwhile, a new Hotel Indigo is under construction in downtown Newark and expected to open in May.

Hotel Indigo closed Sept. 15 and the homeowners association overseeing the residential part of the building met Sept. 12 to consider converting the space to 68 one-bedroom residential units. A corporate spokesperson for InterContinental Hotel Group (IHG) referred questions to the property owner; LoMonaco did not return phone messages seeking clarification. The association voted to approve the 17th floor conversion, according to residents, but no vote was taken about converting the hotel space. Floors two through four were closed with a temporary gym planned on the second floor for residents.

The property owner, 80 E. Milton Ave., LLC, is still waiting on building permits for renovations to the 17th floor, which were approved by the Planning Board earlier this year and would increase the number of units on the top floor from 13 to 20, and overall from 209 to 229. The hotel space could accommodate about 68 one-bedroom units of about 800 to 900 square feet, according to the legal notice announcing the Sept. 12 meeting.

A subsidiary of a pension fund (LongView ULTRA Construction Loan Investment Fund), 80 E. Milton Ave., LLC acquired Carriage City Plaza in foreclosure in 2011, including the hotel, retail space and 147 unsold condo units, which have since been leased at market rates; one-bedrooms starting at $1,500 and two-bedrooms at $1,800.

The 102-room hotel had been barely a break-even effort and would have lost money if not for Hurricane Sandy last fall, LoMonaco told residents, claiming occupancy rates of between 62 and 67 percent. As long as the hotel broke even and wasn’t hemorrhaging cash, LoMonaco told city officials that he would not close it. However, it appears that InterContinental Hotel Group (IHG) pulled the license for Hotel Indigo. As per the agreement with the parent company, 80 E. Milton, LLC would have had to spend $350,000 by April to do a brand refresh of the hotel, a requirement to keep the Indigo license. There also were issues with the permit for the existing Aria Bar and Bistro, with some question whether the city ever approved the appropriate permits.

LoMonaco said his firm, a construction/pension fund, already has put some $200,000 into the property that has yet to be recouped but told residents he did not know the hotel was integral to the city’s redevelopment plans. With the hotel gone, LoMonaco told residents it’s easier for owners and tenants; a concierge will be on duty from 7 a.m. to midnight, with overnight security. If the housing market improves, he told residents he would sell the units rather than rent but he doesn’t see the market improving that much anytime soon and it could be faster to get the hotel designation removed. Any investor with interest in the building would seek approval to convert the hotel floors into multi-family residential, he told residents.

Some owners have expressed frustration about the inability to refinance or to get buyers to secure financing because of the high ratio of rental units, and those prospects aren’t likely to improve with a defunct hotel in the mix. It’s also questionable whether the condo-hotel designation helps or hurts refinancing.

With the exception of one space, an Edward Jones investment advisor, the ground-floor retail along Irving Street continues to be vacant, however, there is a prospect, with the possibility of a sports bar to occupy the corner at East Milton Avenue and Irving Street, where a restaurant originally was planned and the Sky View leasing office currently is located.