Richland kills deal for waterfront micro-apartments. And sends a warning
Richland has effectively killed a deal that would convert a 50-year-old waterfront hotel into micro-apartments.
But that hasn’t stopped the sale of the 150-room property.
The Oregon-based company told the Tri-City Herald that despite the setback, they still intend to buy the hotel and scale back their proposed $15 million investment.
In a letter to the developer obtained this week by the Herald, the city has threatened to stop the sale and take them to court if they try to operate the property as anything but a hotel.
Riverfront proposal
Fortify Holdings came to the Richland City Council in October with the development proposal to turn the aging, under-performing Riverfront Hotel into tiny apartments.
The company also wanted to develop retail and dining options on the 20 acres between the Columbia River shoreline and George Washington Way.
Fortify also proposed adding town homes to undeveloped portions of the property. They already are working on converting five other Tri-Cities hotels, including two in Richland, into micro-apartments.
Fortify was asking the city to sell the land under the now closed hotel in order to make it worth their investment. Because it’s waterfront property, the hotel owners did not own the land, but leased it from the city.
March 31 was the closing deadline to buy the hotel, which for years was a Shilo Inn.
In December, the council met in a closed-door executive session to decide whether they would sell the land, City Manager John Amundson told the Herald this week.
Amundson said the council did not vote on the issue but discussed it in private and directed him to send a letter to Fortify explaining the city’s position.
The letter dated Dec. 21 rejected the land sale and included a warning that the city would pursue legal action should they try to operate it as anything other than a hotel.
The city council held a regular meeting on Dec. 21 and the meeting agenda listed a general item of discussion on current or potential litigation for an executive session. But the meeting minutes make no mention of the letter or decision.
Previously, the council, after much debate, approved zoning changes for other Fortify properties to allow apartments under 500 square feet.
Legal warning
The two-page letter to Fortify, signed by Mayor Ryan Lukson, outlines the terms of the land lease, and said that although the hotel’s current owners have the option of transferring the lease, the city can terminate the contract if the lease terms are not met.
“Evidence that Fortify is leasing the premises or operating as a de facto apartment complex would violate the Lessee’s covenant to operate as a hotel ...,” says the letter obtained through Washington state’s Public Records Act.
It goes on to say the lease agreement allows the city to pursue financial damages for lease violations.
The city noted that while it had changed zoning requirements for other hotels that Fortify had purchased, it’s unwilling to do so for the Riverfront Hotel.
Current zoning requires any dwelling to be at least 500 square feet, about double the size of the proposed studio apartments at the Riverfront Hotel.
“The City has grave concerns, based on statements made by an agent of Fortify Holdings, LLC, that Fortify does not intend to operate the property as a hotel, and would instead violate the City’s zoning code to provide apartment dwelling units that do not meet minimum standards,” said the letter.
“In light of the above, the City encourages Fortify Holdings, LLC to give careful consideration to its future actions concerning 50 Comstock Street,” it continued. “Again, the City Council welcomes Fortify’s investment and development interest in the City of Richland, and looks forward to the redevelopment of the properties Fortify has already acquired.”
Because the proposed apartments would not meet Richland’s zoning standards without a change, the city believes it has grounds to refuse to sign off on the transfer of the lease, should the property be sold to Fortify.
Fortify’s Regional Manager Robert Jacobs told the Herald that the company still plans to buy the hotel and will operate it as a hotel.
And, he said, they are working with the city to ensure the terms of the lease are met. “We are working with the city of Richland to understand our options for operating the hotel and remaining compliant with the lease terms and zoning code,” he said.
Jacobs said the company will likely operate the hotel as-is, foregoing the planned multi-million-dollar investment in the hotel and surrounding property.
Development roadblocks
Fortify recently ran into similar concerns with its proposal to buy the Clover Island Inn in Kennewick and the land it sits on.
Last month, Port of Kennewick commissioners voted 2-1 in an open session against selling the land, and tabled a second resolution that would prevent the hotel from being turned into apartments.
They asked Fortify to come back to them with a new proposal, should the company go through with buying the hotel.
Fortify president Ziad Elsahili told the commissioners the company still expects to buy the Clover Island Inn and operate it as a hotel. But he added they will not be investing $20 million in renovating the aging property and other adjacent retail development.
The Riverfront Hotel in Richland is currently owned by Traum Ventures, a holding company affiliated with J&J Hospitality Group based in Beaverton, Ore.
The hotel was built in 1970 and last sold in 2018 for $3.6 million.
Last year, it was appraised at $3.4 million by the Benton County Assessor’s Office. The Herald was unable to reach the current owners about the pending sale.
The first of Fortify’s Tri-Cities micro-apartment properties to open will likely be The Q — the old Kennewick Quality Inn — and The Franklin — formerly the Best Western Plus Columbia River Hotel in Richland.
The company is hoping to begin renting units in late summer or early fall.
Their other Tri-Cities properties are the Days Inn in Richland and, in Pasco, Fortify has purchased the Loyalty Inn and the Rodeway Inn. They also are under contract to buy the Economy Inn in Richland.
