50-year-old Tri-Cities waterfront hotel could be the latest micro apartment project

Richland’s Riverfront Hotel could be the next in line for a major makeover.

Oregon-based Fortify Holdings is looking to convert the nearly 50-year-old former Shilo Inn into loft and single bedroom apartments as part of a plan that could also include a wine village and other housing.

The plan hinges on the city agreeing to sell the 20 acres that the 150-room hotel sits on. The hotel faces George Washington Way and backs up to the Columbia River near Howard Amon Park.

Fortify Holdings President Ziad Elsahili told council at a recent meeting that he has an agreement in place to buy the aging property, but getting the city-owned land must be part of the deal.

“No one is going to invest the kind of capital necessary to renovate this property without the land,” he said. “It’s just a waste of potential over there.”

He said they are prepared to invest $15 million in renovating the hotel, which was built in 1970.

Fortify has until March 31 to close the deal, which also includes buying the Economy Inn on George Washington Way, he said.

But it’s not clear whether the city council will sign off on the proposal.

Hotel conversions

The Shilo sold for $3.6 million in 2018 to Traum Ventures, an Oregon entity connected to Beaverton-based J & J Hospitality Group, operating as Miracle K Management.

For Elsahili and Fortify Holdings it would be the latest in a multi-million-dollar list of hotels and motels they are looking to convert into tiny apartments.

So far, the Tri-City Herald has reported the projects include converting the Days Inn and Best Western in Richland, The Loyalty Inn and Rodeway Inn in Pasco and The Quality Inn in Kennewick.

The largest is the six-story, 200-room Best Western Plus, once called the M Hotel and the Tower Inn on George Washington Way.

The company targets properties that are struggling financially, including some that have seen increasing crime problems.

And it would be the fourth hotel/motel one of the busiest streets in the Tri-Cities and the commuter path to the Tri-Cities biggest employers — the Hanford nuclear site and Pacific Northwest National Laboratory.

The company, which couldn’t be reached this week about the latest proposal, has been a multi-family housing developer for 20 years and owns 17 properties, according to its website. Most are in the Vancouver and Portland areas.

Waterfront zone

The Tri-Cities is one of the toughest markets in the U.S. to find an apartment to rent, according to RentCafe.com, an apartment listing service.

That, together with climbing home prices, has made it the perfect time for Fortify to step in, said Rob Jacobs, a regional manager for the developer.

“The Riverfront Hotel is a really unique opportunity both for Fortify and for Richland to be able to partner in developing this premier waterfront location,” he told the Richland council. “In other markets where Fortify has transitioned these hotel and motel properties into studio apartments, we’ve seen incredibly high demand.”

The apartments are aimed at students, traveling nurses and doctors and contract workers and other young professionals. They would be priced similar to higher-end properties in the market, Jacobs said.

Among the other concessions, they are willing to let the city pick an appraiser to value the land.

Benton County Assessor’s Office records show the land with a “waterfront” zoning is valued at $5 million.

Along with converting the hotel to apartments, the company has plans for a “wine village” to be built on an undeveloped corner of the property. Jacobs said they’ve already had interest from some restaurants.

They also aim to use the existing commercial space at the hotel to bring in more businesses.

The developers see it as a place that takes advantage of the setting on the water.

“We know how important it is for Richland to know that property fits the vision that you want,” Elsahili said. “You want to make sure whoever is going to develop it is going to do it the right way.”

The city would need to grant the developer a variance similar to one approved earlier this year for another motel to allow for apartments smaller than 500 square feet.

Council reaction

Elsahili previously asked Richland officials to change a rule that limited the minimum size of apartments in the city’s central business district.

At that time, the council voted 5-2 to allow the company to convert the 97 rooms at the Days Inn into an equal number of 260-square-foot loft apartments.

But the new proposal got a mixed reaction from the council.

Mayor Ryan Lukson and Councilman Phil Lemley supported the change.

Lukson said the city could spend a long time waiting for the perfect suggestion, and still not find it.

“Right now, that is not a very good use of our waterfront,” he said. “It’s an underutilized hotel that is not being invested in that is doing nothing for our community.”

He liked that there was some room for negotiation, and the apartments would offer a range of options for people looking for a home.

Councilman Michael Alvarez was more skeptical, especially of a developer who only recently started investing in the city. He was concerned that the housing was aimed at only single people.

Fortify has told the city it would consider adding other housing, possibly some townhomes, at the riverfront site.

Councilwoman Marianne Boring also said there should be something other than apartments. She voted against the earlier change that allowed the Days Inn project to go forward.

“I think we’re apartment-ed to death,” she said.

Richland city officials plan to do more research into the project and order an appraisal for the land. No date is set for when the issue will return to the council.