Hotel builder in talks over landmark store
Upper stories of Meier & Frank building may get a makeover
The May Department Stores Co. is in talks with a hotel developer interested in taking over the upper two-thirds of its downtown Meier & Frank store for luxury suites, according to well-placed sources.
The May Co. Ñ which last fall appeared to stall its renovation plans for the 665,000-square-foot landmark building Ñ would continue to keep retail space on the first five floors of the 14-story structure.
City officials who confirmed that talks were under way would not disclose which developer is pursuing the multimillion-dollar project. The May Co. declined to comment.
Several developers have eyed the building, said Martha Richmond, a spokeswoman for the Portland Development Commission. They include San Francisco-based Kimpton Hotels & Restaurant Group LLC, which owns the Hotel Vintage Plaza and 5th Avenue Suites Hotel, and Cleveland-based Forest City Enterprises.
Representatives of Forest City, which developed University Park Hotel in Cambridge, Mass., recently visited Portland.
The Meier & Frank flagship store is viewed as ground zero for the whole retail district, said PDC Chairman John Russell.
'It's been the ambition of the
commission for decades to do the right thing by that building, whatever that might be,' he said. 'It's on our radar screen. It's controversial not because of the nature of the project, but the magnitude of public investment.'
A study last year by SERA Architects suggested rehabilitating the store into mixed use Ñ hotel, office or residential Ñ for an estimated $64 million. PDC put a higher price tag on the project: $80 million.
Russell said the city's financial contribution to the project is a subject of the negotiations.
The store is in PDC's River District urban renewal area, which stretches from the Willamette River to the north to Southwest Morrison Street to the south.
Putting hotel rooms Ñ even a spa and restaurant Ñ above shoppers is not unusual.
May Co. has converted flagship stores in Philadelphia and other cities to include retail space and offices. The May-owned Lord & Taylor store in Philadelphia has offices on its upper floors. Another May store, Strawbridge's, is undergoing conversion: Its first six floors will remain retail and the top six floors will become office space.
Many rooms for rent
Portland has a tradition of converting historic buildings into hotels or upgrading existing hotels, including the Heathman Hotel, the Governor Hotel and Embassy Suites at the old Multnomah Hotel.
'There's been some successful projects created with historic properties,' said Ed Dundon, president of Dundon Corp., a hotel consulting firm. 'It could make sense. But it's a very soft market that's been in decline since 1998. There may be a turnaround around the corner, but it could be harmful if new rooms came on the market in two years.'
Hotel occupancy rates hover around 60 percent, down from the high 70s four years ago, Dundon said. The retail market isn't faring much better. May Co. sales were down 9.9 percent in March.
Last year, the company laid off 600 employees when it relocated its Meier & Frank division offices in Portland and merged them with Robinsons-May in Los Angeles.
May Co. executives told city officials last October that discussions to renovate the Meier & Frank store would be put on hold until the dismal retail climate had brightened. They urged the city to keep looking for options. It was PDC officials who introduced the hotel developer to May Co. executives soon after, Russell said.
May has owned the Meier & Frank chain since 1966. Only about 230,000 square feet of the store is now used for selling goods. The rest has been closed off for storage or other reasons. Making the store better able to withstand earthquakes would cost about $6 million of the total renovation costs.
Working out the numbers
The PDC is in the midst of its 2003-2004 budget process, which would determine the amount spent for a Meier & Frank renovation as well as projects such as a second park in the Pearl District and a major league baseball park.
Funding for the projects would come from an upcoming $50 million bond issue for the River District, the first since an Oregon Supreme Court ruling rewrote the way the commission raised tax money. The case was settled last week.
The bond proceeds will go to pay off the money spent in the River District over the past three years and generate new money for the neighborhood. There's a full list of unfunded projects in the district that will be looked at for use of those funds, Richmond said.
A major league ballpark, at an estimated $350 million, 'is such a gargantuan project in any district, it would be a trade-off of a dozen smaller projects,' Russell said. 'There are lots of bridges to be crossed.'