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Portland Business Journal: PSU set to check out of hotel business
Author: Wendy Culverwell Real Estate Daily editor, Portland Business Journal
Posted: June 25, 2013

Read the original story here in the Portland Business Journal.

It’s last call for the University Place Hotel on the eastern edge of Portland State University.

Seven years after PSU paid $23 million for the 235-room hotel at 310 S.W. Lincoln St., the school wants to put its four acres to better use.

PSU selected Johnson-Reid, a Portland real estate development and land-use economics firm, to lead a yearlong, $150,000 study to establish a new vision for the property.

The site presents a unique opportunity for PSU.

It’s rare that four acres of urban space with freeway access becomes available for development. Johnson-Reid’s report, due next spring, also comes as PSU pursues a grand vision to enlarge its campus over the next two decades as enrollment ticks toward the 40,000 mark, from 30,000 today.

The plan, developed in 2010, calls for some 7 million square feet of new space. University Place will play a major role in that plan, whether it is redeveloped by PSU itself or a private development partner. The property is in the Portland Development Commission’s North Macadam Urban Renewal Area.

PSU spokesman Scott Gallagher said the project will likely involve some sort of public-private partnership and a mixed-use development offering office, retail, residential, classroom or even hotel and convention space.

For now, there is only one certainty: The sprawling and outdated University Place Hotel isn’t going to be part of it.

“It’s a blank slate,” Gallagher said.

Reluctant hotel operator

The hotel was constructed as a motor hotel in 1970. The three-story building is surrounded by a parking lot. PSU operates the hotel largely to generate revenue to help service the debt incurred when it bought the property from the PDC in 2004.

The property generated about $3.5 million in revenue in its 2011-2012 fiscal year. The occupancy rate in the first four months of 2013 was just shy of 30 percent. That’s well below the 75.9 percent average occupancy rate posted by all downtown Portland hotels at the end of 2012.

While PSU never wanted to be in the hotel business, it had to put redevelopment plans on the back burner because of the recession and because other capital projects took precedence. Notably, it partnered with a private developer to construct an 860-bed student residence, University Pointe at College Station.

The new student residence took pressure off PSU to create more on-campus living space, freeing it to consider nonresidential uses for University Place.

PSU selected Johnson-Reid after four firms responded to a Request for Proposals issued earlier this year. TriMet is funding the study to help activate the area around its Lincoln Station Max stop, which is directly in front of the hotel’s restaurant entrance.

The Max stop is part of the new Portland-Milwaukie Light Rail line now under construction.

An ‘interesting’ site

Principal Jerry Johnson called University Place one of the most interesting properties in Portland’s Central Business District.

The site is in the transitional zone between downtown and South Waterfront. The new Max line will only bring more attention.

Jason Franklin, PSU’s director of planning and design, said the property should be attractive to future developers.

It is easily accessible from I-405, sits between the South Waterfront and PSU and its neighborhood already is popular with both residents and businesses. Three high-rise condominiums flank it to the east and south; the Lovejoy Apartments are directly across the street and several downtown office complexes are just blocks away.

“I don’t think you find sites that are nearly four acres with freeway access anymore,” said Franklin.

Franklin said PSU hopes the Johnson-Reid study will build interest in the property among developers.

The Portland-Milwaukie line is expected to bring fresh demand for services when the 7.3-mile, $1.5 billion line opens in 2015.