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NW Natural explores move from Old Town

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Utility mulls new headquarters once lease expires in 2020, even though landlord and neighborhood wants the company to stay.

PORTLAND TRIBUNE: JONATHAN HOUSE - NW Natural, which settled in the hard-scrabble Old Town Chinatown neighborhood before most companies would consider it, may move out when its lease expires.Although the Old Town Chinatown neighborhood finally is undergoing a long overdue renaissance, one of its oldest and largest tenants is thinking of moving out.

NW Natural has been based in the One Pacific Building along the MAX line at the west end of the Steel Bridge for 30 years. But the utility is considering whether to renew the lease when it expires in 2020, buy or lease another office building, or build its own new headquarters somewhere else.

"We have evaluated existing buildings and developable sites in and around Portland's downtown. We issued an RFP (request for proposals) and are down to the four finalists, which we cannot name, and includes our current building," says Melissa Moore, NW Natural's senior corporate communications manager.

According to Moore, about 600 of the natural gas company's 1,100 employees work at the 13-story building at 220 N.W. Second Ave. NW Natural will decide what to do this year, she says.

Buying or building a new headquarters will require the approval of the Oregon Public Utility Commission, because the cost will be paid by NW Natural ratepayers, according to PUC Chief Operating Officer Michael Dougherty.

"Any capital expenditure that is paid for by ratepayers has to be reviewed by the staff and approved by the commission as part of a rate-setting case," Dougherty says.

Factors to be considered, Doughtery says, include whether NW Natural has carefully considered all options and conducted its due diligence on the proposal. Stakeholders such as the Citizens Utility Board and the Northwest Industrial Gas Users association also will be able to weigh in.

"They can't just do anything they want," says Doughtery, noting NW Natural officials already have met once with PUC staffers to tell them what the company is considering. A follow-up meeting is expected to occur soon.

Dougherty says NW Natural has told PUC staff that one reason the company is exploring its options is because the building might be damaged in a major earthquake, like the one predicted for the Portland region.

But the owners of the building, California-based Menlo Equities, are upgrading the building's seismic standards to survive such an earthquake. According to co-founder and Vice Chairman Rick Holmstrom, that work is part of a $7 million renovation that also will include a lobby expansion intended to take the building "from class A to class A-plus."

Holmstrom says NW Natural has been an excellent tenant, and he hopes the company will stay in the 240,000-square-foot building, where it currently occupies around 70 percent of the space. He also says NW Natural should want to renew its lease because of other recent and planned redevelopment projects in the neighborhood. They include the new Ankrom Moisan Architects building, the renovated Society Hotel and Oregon College of Oriental Medicine buildings, and the University of Oregon programs in the renovated White Stag Block.

"We're doing everything in our power to keep them there, to induce them to stay. The renovation of the lobby is going to be great for the whole neighborhood," Holmstrom says. "We value the stability associated with a tenant of their scale and longevity. We feel there's value to the neighborhood as well, in retaining an anchor presence. It's always easier to sign one lease than many."

The Old Town Chinatown Community Association, which represents both residents and businesses in the neighborhood, also wants NW Natural to stay.

"NW Natural was an early stakeholder here and has been critical to improving the vitality and stability of the Old Town Chinatown community," says association chairwoman Helen Ying. "Old Town has finally begun to experience the revitalization that so many of our early stakeholders worked hard to achieve, and we look forward to working with NW Natural as we continue on this positive trajectory."

But Moore says her company will do what is in the best long-term interests of its customers.

"There is a variety of criteria we need to consider, including cost, location and seismic considerations. The final decision will be approved by our executives and our board," Moore says.

NW Natural helped build its current headquarters. According to Moore, One Pacific Square was constructed in 1983 and originally owned by a joint venture between Pacific Square Corp. and the Hayden Corp. PSC, which held a 50 percent interest in the building, was a wholly owned nonutility real estate management subsidiary of NW Natural. In 1994, NW Natural made a business decision to sell its interest in the partnership to Hillman Properties Northwest. The sale did not affect the utility's lease, which was valid until 2006 with options to extend beyond that point.

The building eventually was purchased by HFF, a joint venture between GE Asset Management and The Ashforth Company, which renovated it in 2011 to appeal to the technology firms that are increasingly drawn to Portland. They sold it to Menlo Equities in February 2015 for $48.5 million.

Holmstrom says the planned renovations will make the building even more desirable.

"We're going to do all the wonderful Portland things like bike storage, a fitness facility, being sensitive to environmental standards and issues, and get LEED certification," Holmstrom says.