Exclusive | Micro-apartment developer ditches deal to buy Clover Island Inn
A Portland-based micro-apartment developer is pulling out of another riverfront deal after running into obstacles with local authorities.
Fortify Holdings, which operates apartment complexes in the Pacific Northwest, and recently began converting old or under-performing hotels into micro-apartments wanted to buy the Clover Island Inn and spend about $20 million renovating it.
However, the developers ran into pushback from the Port of Kennewick, and from some members of the public.
The port does not own the hotel, but does own the land it sits on and has the final say on transferring the land lease.
The port previously blocked any attempt to convert the hotel into apartments or offer long-term leases, leaving Fortify only with the option to run it as a hotel. They were still open to transferring the lease, but wanted more information from Fortify.
The port also created a new due diligence process to vet the deal to ensure it aligned with its goals for the Historic Kennewick Waterfront District Master Plan, and to get a better picture of how the company would run the hotel.
Attorney Todd Hume told the commissioners that Fortify did not buy the hotel by the end of March as was originally planned, and that he was told Tuesday that Fortify was negotiating an exit from the deal.
“That report is wonderful news, and I think it’s going to make a lot of people very, very happy and the port can move forward and not have to worry about what’s going to happen to the hotel, and we can continue to do improvements to Clover Island as we have planned and what our citizens wanted to see us do,” said Commission President Skip Novakovich.
Members of the public were concerned about turning the hotel into low income housing, which Fortify officials said was not their plan, or that converting the 200 hotel rooms into apartments would wipe out most of the parking on the island.
The hotel’s parking lot is often used for events in summer, and many citizens worried that a housing project on the island could make it less open to the public.
Port CEO Tim Arntzen told the Tri-City Herald on Thursday that following Hume’s update, he has asked for a formal letter so the port has documentation about where the deal now stands.
He hopes to update the commission about that at its next regular meeting, and then they can discuss what they want to do next.
The hotel was not listed for sale before Fortify approached the ownership group.
Crane company owner Bill Lampson co-owns the hotel with six other Tri-Cities investors. He told the Herald in January that the hotel was not for sale but that they were approached with an offer they couldn’t refuse. At the time he said that if the deal fell through, he didn’t expect it to go back on the market.
“From the port’s perspective, we’ll wait and see the letter,” Arntzen said. “But I can tell you that a hotel squarely fits within the master plan. From my perspective the hotel has been a valuable contributor to the atmosphere.”
Fortify’s Regional Manager Robert Jacobs confirmed to the Herald in an email on Thursday that they would not be moving forward on buying Clover Island, but are still committed to their other Tri-Cities and Eastern Washington properties.
“Unfortunately, the Port of Kennewick did not share our vision for renovating the hotel building and investing in the port district with private funds,” Jacobs wrote. “Fortify’s $20 million investment in the hotel property and Clover Island would have transformed an old building and increased community access to this unique waterfront district by building new restaurants, bars, banquet venues, concert stages, entertainment venues, and watersport rental shops.”
Jacobs said Fortify wishes the current ownership group and the port well with their operations, and their focus now will be their projects coming to completion over the next few months.
“Fortify is excited to complete numerous projects across Eastern Washington in the coming months. These renovation projects will bring an exciting new housing product to the community while simultaneously reducing crime and combating the region’s housing crisis,” Jacobs said.
“Our regional partners in Richland, Kennewick, Pasco, Yakima, Ellensburg, Walla Walla, Spokane, Kalispell, and Fife have been exceptional to work with throughout development and our long-term commitment to the region is something we take pride in,” said the email.
Arntzen said housing does have a place on Clover Island, but they are looking at how to add a small number of units in the 1,000- to 1,400-square-foot range.
Arntzen said the nearby Willows property also could be developed into housing eventually, but the developer will have to be ready with a clear plan to sell their vision to the public.
A major driving factor behind the fierce pushback against Fortify was members of the public thinking it was another attempt to bring low-income housing to the island.
In 2020, Sen. Patty Murray’s office suggested the port partner with the Kennewick Housing Authority to apply for a $2.4 million infrastructure grant through the Build Back Better program. That deal ultimately fell through, but the concern lingered.
The port wants to develop 6.5 acres of a one-time mobile home park into “urban mixed use” area with a variety of housing types and income levels. In recent meetings they’ve been developing design standards for the area.
“We have to be careful with that, if and when the time comes ...., “ Arntzen said. “When we come forward, it would be helpful if the public is clear on what it is or isn’t.”
Fortify previously told the Herald that none of its Tri-Cities properties would be eligible for housing vouchers.
Richland property
The decision to pull out of the Clover Island deal comes about two months after the Richland City Council decided in a closed-door meeting to oppose a deal for Fortify to purchase and renovate the Riverfront Hotel.
In that meeting the city council sent a letter to Fortify threatening to stop the sale and take them to court if they tried to operate the property as anything but a hotel. The proposed purchase and renovation was worth an estimated $15 million.
At both locations Fortify wanted to renovate the hotels into upscale, studio style micro-apartments, as well as add restaurants and shopping and work with the city and port on larger development projects for their master plans in the area.
Ultimately, micro-apartments were not in line with the vision Richland had for that area or the Port of Kennewick has for its waterfront properties.
Arntzen said that he thinks their vision for more affordable apartments in the Tri-Cities has merit, but that ultimately the Clover Island Inn might not have been the best fit.
He hopes the port’s upcoming Vista Field development will provide some opportunities for developers to bring in some mid-level housing and rentals.
This story was originally published April 28, 2022 at 10:45 AM.
