News for the Hospitality Executive
Portland Oregon Will Provide Sage Hospitality $13.9 million
in Low Interest
Loans to Transform Downtown Office Buildiong Into a
Swank 334-room hote Hotel
|By Laura Gunderson, The Oregonian, Portland, Ore.
Knight Ridder/Tribune Business News
May 26, 2005 - - The Portland Development Commission on Wednesday approved $13.9 million in low-interest loans for a project that will renovate the downtown Portland Meier & Frank, transforming its upper floors into a swank hotel.
After a brief presentation, the commission voted unanimously to provide Denver hotel developer Sage Hospitality Resources Inc. with three loans.
The decision caps years of PDC work to find a way to revive the historic building on Southwest Fifth Avenue at the heart of downtown Portland's retail core. Meier & Frank's parent company, May Department Stores Co., and Sage have both said they would like to begin construction early next year, but first have to reach a final sales agreement and gain city approval.
The developers say the project will cost $137.3 million -- including $107.3 million for the hotel and $30 million for department store renovations.
Though St. Louis-based May has agreed to be purchased by competitor Federated Department Stores Inc., company officials have said a change of hands should not affect the renovation plans. Stockholders for May and Federated are expected to meet separately July 13 to vote on the $11 billion buyout.
Even with the remaining hurdles, commission members expressed confidence after the vote Wednesday.
"This is a move forward for downtown Portland and the region," said Matt Hennessee, chairman of the five-member board. "This is very, very important."
The Portland Development Commission is a semi-independent city agency that manages most of the city's economic development.
This fall, Sage plans to buy floors six through 16 from May for the 334-room hotel, which it intends to open as a Marriott Renaissance in early 2008. Sage estimates the project could provide 200 full-time equivalent construction jobs over nearly four years, and ultimately, 175 hotel positions.
Portland Development Commission's loans, which will help pay for seismic and other safety improvements needed for the project, make up a little more than 10 percent of the four-star hotel project's $107.3 million price tag.
The PDC made a $3.3 million, 15-year loan to Sage that will be interest-free for the first three years and then grow to 3 percent in the fourth year, according to the contract. The loan reverts to interest-free in the 10th year with a balloon payment in the final year.
Of the $3.3 million, $500,000 will go to May, a loan the commission said it may forgive in light of the 10 management and 90 full-time equivalent jobs that are expected to remain in Portland if the department store stays open. That money is a reimbursement for May's recent purchase of a piece of land beneath the building.
The commission also made smaller low-interest loans to Sage subsidiaries, including $8.6 million to Urban Heritage Portland Hotel and $2 million to Portland Hotel Investment Fund. Urban Heritage's 25-year loan carries 3 percent interest-only payments for the first three years with 3 percent interest and principal payments beginning in the fourth year. Portland Hotel's loan carries the same terms over eight years with an added $100,000 annual principal payments starting in the fourth year.
As part of the contract, Sage also agreed to reattach the building's original terra cotta facade and has aimed to meet federal environmentally friendly building standards.
May agreed to pay $30 million to morph the building's lower third into a glossy new five-floor department store, and plans to keep Meier & Frank open through the remodel.
May officials have said the new store, which the agreement said could open in the fall of 2007, is likely to stock similar types of merchandise to those currently carried at Meier & Frank.
To brighten the sidewalks hugging the more than century-old building, plans call for short glass awnings. Designs also call for smaller retail spaces, such as a florist or coffee shop, on the main floor at Southwest Fifth and Sixth avenues, where entrances once led inside Meier & Frank.
"This building is an icon for Portland," said Michael O'Connell, the commission's development manager for the project. "This is going to restore the building to its glory days."
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Copyright (c) 2005, The Oregonian, Portland, Ore.
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