Local investors plan three-story brick building
After two rounds of advertisements failed to produce a viable offer, a group of mostly homegrown investors has stepped forward to develop a key downtown property.
The Madras Redevelopment Commission has selected the BrickHouse Group LLC to master plan and develop a portion of the vacant property at the corner of Fourth and D streets.
The seven partners in the group have agreed to pay $658,000 for 45,500 square feet of the total 75,000 square feet of property -- all owned by the MRC.
The partners include Harold and Nancy Siegenhagen, Rick Allen, Tom and Stacy Norton, and Bill and Sylvia Miller, all of Madras, former Madras resident Jim Jones of Portland, Dr. Brian Neukirch of Little Rock, Ark., and Steve Watson of Portland.
"It's going to be a great looking building," said Harold Siegenhagen, a longtime local farmer, who owns the recently remodeled building Great Earth building, located catty-corner to the lot.
The three-story brick building will be constructed on the corner of Fourth and D streets with steel and concrete -- similar to buildings in larger cities such as Bend and Portland.
The developers intend to attract a restaurant as the primary occupant for the main floor, which will also have space for retail. The two upper floors of the 16,000-square-foot building will be available for office space.
Partner Jim Jones, who grew up in Madras and now manages the art glass company Bullseye Glass, in Portland, intends to enhance the building with decorative glass.
"When you walk in the door, there will be fused glass panels that will be backlit," said Jones. "It's decorative glass, but it's an architectural element."
Hennebery Eddy Architects of Portland are in the process of revising the building, which was originally planned for the former Mason House site at the corner of Fifth and E streets.
When the partners learned that it would be expensive to move a transformer, in addition to working with the slope and retaining walls of the Fifth Street property, they decided to consider other properties.
"We put a proposal together and approached the MRC about two weeks ago," said Jones.
The Madras Redevelopment Commission is a nine-member board created in 2002 to determine how to spend the funds collected from the downtown Madras Urban Renewal District. The city formed the URD with the purpose of removing blight and revitalizing the city's core area.
From June of 2005 through August of 2006, the MRC spent $1,585,000 to purchase six properties on or around the old sandstone "hump" along Fourth Street.
Among the buildings on the properties were the former Sam DeRay Meat Co., the Opal Springs Family Center and Christian bookstore, First Church of the Nazarene, and three homes.
By the time the six buildings and nearly 7,500 yards of dirt were removed from the property, the MRC had about $1.8 million in the property, which extends from Third Street to Fourth Street, and from D Street south to Farmer's Insurance.
As the demolition and leveling was occurring, the MRC advertised for a developer, and initially negotiated with Taylor-Pickhardt Real Estate Development of Bend, but failed to settle on a price or timeline for the development.
The company offered $750,000 for the entire parcel -- about $10 per square foot -- and wanted to have more time for phased construction of the project.
Ultimately, the MRC declined the offer and readvertised. In the first round of advertising, the MRC advertised in The Pioneer, The Bulletin and The Daily Journal of Commerce in August and September of 2006.
The second time, the ads were placed in The Daily Journal of Commerce in December of 2006 and January of 2007, and they received no response.
"They'd advertised twice, and then they received this unsolicited offer," said City Administrator Mike Morgan, who provides staff support to the MRC.
With $1.8 million tied up in the purchase and cleanup of the property, the MRC voted on March 6 to accept the BrickHouse Group's offer -- with conditions.
"The MRC's decision, that they make as a matter of policy, is they want to get something constructed," said Morgan. "They want development now, and they want the reinvestment in the downtown area now."
The BrickHouse Group agreed to master plan the entire property, begin construction on the main building by June 30, and provide extra parking, among other conditions.
MRC Chairman Patty Woll, who abstained from the vote because of concerns over the sale price, was nevertheless pleased with the concessions obtained from the developer.
"We paid a lot for the property and removed a lot of blight," she said. "I think we have a great responsibility to the people. We don't want to keep our money in land; our purpose is building facades and removing blight."
Before the investors could obtain financing for the property and building, which are expected to exceed $3 million in cost, Columbia River Bank hired an appraiser to review sales of land-only property over the past couple of years, according to Rick Allen, partner and former Madras mayor.
The appraiser, Dana Bratton of LaGrande, found closing sale prices on bare land in downtown Madras that ranged from $4.5 to $15 per square foot, Allen said. Based on information from the appraiser, BrickHouse offered $16 per square foot.
By comparison, he said, the city of Bend just allowed the Les Schwab Co. to purchase land at Juniper Ridge for $7 a square foot, and prime land in downtown Redmond went for $18 a square foot in November -- without the kind of conditions attached to the MRC's sale.
"The real risk is building the building," said Allen. "The land is only about 10 percent of the cost of the project; the building is the other 90 percent. It's the majority of the cost and it's the majority of the risk."
"The local investors are willing to take the risk because they believe in the town," he said. "When we've taken the risk in the past, it's paid off. This project will not work if you build it and try to sell it."
Allen explained that the partners will have to subsidize the project for years to come. "We're an immature market; our lease rates in Madras have not yet caught up with the cost to sustain or build a building."
"It's a huge risk from a financial standpoint because it's a big investment," said Jones. "It's a long-term investment, no matter what way you look at it."
"I think you have a group of individuals who are interested in doing something they can be proud of years from now," Jones said. "I hope that with this building, we're basically building something that will set a standard."