By Lee Fehrenbacher
This is a big month for Venerable Properties
The Portland company last week closed on the sale of its Industrial Home property on Southeast Martin Luther King Jr. Boulevard to a Seattle developer, and next week will close on the purchase of Washington High School from Portland Public Schools. Venerable expects the long-awaited renovation of the ex-school building to start by the end of the month.
Venerable President Craig Kelly said it’s the beginning of the end of a trying time that included the death of founder Art DeMuro in September 2012.
“The last year of my life was spent figuring this deal out and plus dealing with Art and his estate issues,” Kelly said. “We’re on the downhill slope of Art’s stuff and so now we’re putting more energy into growing the firm again … It’s been a very tough year, but we made it through.”
On Oct. 8, Venerable sold the 26,000-square-foot Industrial Home building it had planned to renovate into creative office and retail space. 200 MLK Associates LLC (Washington’s Secretary of State lists Edmonds, Wash.-based First Western Development Solutions Inc. as the registered agent) purchased the property for $2 million and is planning to redevelop the first floor and part of the second floor as retail space for an outdoor/active lifestyle tenant, according to Capital Pacific, which represented the buyer. The upper floors will be creative office space.
Now, Venerable is focusing on redevelopment of 117,000-square-foot Washington High School at Southeast Stark Street and 14th Avenue, which Kelly and Venerable have been working on since 2009. Kelly said the firm will pay the school district $2 million, and that work will start on Oct. 28.
The $18 million project has had numerous iterations, but the final concept calls for 18,000 square feet of service retail (like medical, dental or insurance agencies) and 55,000 square feet of creative office space. Venerable also plans to reuse an existing 500-seat auditorium, and create a rooftop deck space for events.
“The market’s on fire,” Kelly said. “Rates are rising, there’s minimal vacancy, (and) there are a lot of people who say they’re interested in that market. We’re going to find out if it’s for real or not, because we’re going to build this building, and I think it will be very successful.”
Kelly hopes the property’s proximity to burgeoning inner southeast neighborhoods will make it an attractive alternative to downtown Portland for bike commuters. Amenities like bike parking and showers will be added, and mechanical systems will be upgraded, but the 89-year-old school’s historic charm also will be featured.
Venerable has no tenants lined up for the 100 percent speculative project, which is being financed by PacTrust. Nevertheless, Kelly has faith that if he builds it, they will come.
“Where can you go into any building in the metro area where you have 16-foot-wide hallways with lockers, and then walk into your office that’s an old classroom with 13-foot(-high) ceilings, and 8-foot-wide windows?” he said. “Tell me where. You won’t, and that’s why I think this is going to be a pretty successful project. I think it’s unique enough, and that there are enough tenants in the market that will eat it up.”
One worry among residents is that a heavy commercial or retail development would bring more motor vehicles to the area, which already is poised to gain traffic from a planned $47 million community center next to the school.
However, with only half of the building to work with, a conversion to mostly housing may be difficult, Kelly said.
“It’s a challenge to figure out a plan that is cost-effective to renovate an entire building where you can only get half the building’s rent,” he said. “I’m trying to keep the costs earthbound as opposed to up in the stratosphere.”
Another challenge presented by the property is that it’s zoned R1. It can have one housing unit per 1,000 feet, but financing can be difficult and there are restrictions in terms of commercial uses, Kelly said.
Venerable is weighing whether to apply for a zoning change for the property, but that process would likely be long and difficult.
“It just adds another wrinkle to the mix,” Kelly said. “This is already a very difficult financing environment for any commercial development.”
The plan is to decide within the next two months on a use or uses for the building, and then address potential zoning issues.
Project stakeholders ranging from developers to neighboring residents have remained positive, partly in tribute to Venerable’s late founder, Art DeMuro, who pushed for the redevelopment.
“We had a very close relationship with Art DeMuro, and I personally was devastated when we lost him,” Lindsay said. “And the show must go on.”
Check Daily Journal of Commerce website.