Developer pulls plans for hotel at North Anchor property
The plan to build a 121-room boutique hotel at the City-owned North Anchor block has fallen through, according to Lake Oswego Mayor Kent Studebaker.
Studebaker told The Review Tuesday that Vanessa Sturgeon of Sturgeon Development Partners — the local firm behind the deal that would have brought a new luxury hotel, retail space and parking garage to the stretch of B Avenue between State Street and the alley between First and Second Streets — has backed out of the deal due to an inability to secure funding.
In an email to the City Council dated Friday, Aug. 16, Sturgeon wrote that securing financing for the project had been a struggle from the beginning, and even after changing the scope and design of the project, it was too much risk for her and her investors.
According to the email, Sturgeon blames the council's lack of unanimity in support of the project as the reason she couldn't secure the necessary funding.
"Unfortunately, (Councilor) Nguyen's public statements of skepticism and lack of support for the project caused consternation with our investors and we have been unable to convince them to place their capital and resources into the project," Sturgeon wrote, referencing a June 18 council meeting during which Nguyen suggested that perhaps the City should reopen the request for proposal on the project to see what other developers might come up with.
At that meeting, the council voted 5-2 — with Nguyen and Councilor Theresa Kohlhoff in opposition — to approve a new development agreement that would be drafted by former City Manager Scott Lazenby, which in turn Sturgeon never signed. Because SDP never signed the new development agreement drafted by the City, the firm will not be on the hook for the $100,000 deposit that came with the original agreement.
The project's shape morphed through the course of a process that began in 2015; originally, the developers called for part hotel, part age-restricted apartment building with underground parking. The project then turned into four floors of a high-end hotel with a restaurant and meeting rooms on the main level, including an above ground parking structure wrapped with retail on the far west end across First Street adjacent to the main building.
The latest move by SDP leaves the City in a tough spot with no other formal offers on the table for the redevelopment of the North Anchor site, but according to Studebaker, the council is still interested in the development of a boutique hotel. The City will either reopen a request for proposals or will begin informal talks with industry leaders to gauge whether there is any interest locally to build a hotel there.
While Studebaker admits that the situation is frustrating, he's glad this decision by Sturgeon was made now rather than by the council later.
"We're pretty sure there will be other people interested in building a hotel there, which is what most of us would like to see happen because it's been a long term goal to get a boutique hotel in this part of town," Studebaker said.
Nguyen said he isn't insulted by Sturgeon naming him specifically as a reason for backing out of the deal, but he is saddened that it's taken the City four years to get to this point with nothing to show for it.
"If circumstances change, there's nothing wrong with saying, 'let's part ways,' but we could have done that much further back," Nguyen said. "Those city blocks are a gateway to our community, and it's a shame we haven't been able to do more with it."
Nguyen said he believes that any future RFP for the North Anchor development must include specific milestones and objectives built into the document so that prospective developers have a clear idea of what's expected of them and when it's expected to materialize.
"We should evaluate future proposals on how well they conform to our objectives and goals for this project," Nguyen said.
Councilor John LaMotte told The Review that the situation isn't necessarily shocking, but unfortunate in that nearly four years have been wasted. He said the council repeatedly moved the conversation forward in approving several changes to the project's scope, design and timeline.
"This was continuously approved despite non performance. There was no problem from our side, it was from her. Now we've lost four years, and hopefully now we get a developer who gives us a great project," LaMotte said.
Councilor Theresa Kohlhoff was the lone vote against the approval of the updated drawings in April. She also voted against allowing the project to drop the senior housing portion when it came up for consideration last fall.
Kohlhoff said she'd like to see any future proposal for the redevelopment of the North Anchor block include an affordable housing piece.
"I do think it makes a great deal of sense to include affordable housing because the city owns the property. Even a portion of it would be fantastic; you're close to town, you're close to public transit," she said. "Affordable housing is key to creating a more diverse, welcoming and inclusive city. If we don't live next to new people, it won't happen."
Sturgeon did not respond to a request for comment.
North Anchor Timeline
2004: North Anchor property serves as centerpiece in City's East End Redevelopment Plan
2010: City begins to acquire parcels at site
Nov. 2012: Voters reject proposal to expand library by moving it to North Anchor property
Jan. 2015: City Council lists development of North Anchor among 2015 goals
Aug. 2015: City issues request for proposals from potential developers
Oct. 2015: City Council votes unanimously to negotiate development agreement with Sturgeon Development Partners for mixed-use residential/hotel concept
July 2016: Council agrees to purchase third and final parcel of land needed for project, on behalf of Sturgeon Development
Jan. 2018: City approves sale-and-development agreement for North Anchor project
July 2018: Sturgeon announces project will likely be split into two phases: construction of hotel, then office building
Dec. 2018: Sturgeon says proposed 90-room hotel wouldn't be big enough
March 2019: City approves conceptual drawings for 121-room hotel
June 2019: City approves updated development agreement; Sturgeon never signs it
Aug. 2019: Sturgeon pulls proposal
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