PDC Files Suit to Take Menashe Property

PORTLAND-The Portland Development Commission has filed suit in Multnomah County Circuit Court in order to gain control of a site located across from the Oregon Convention Center that the agency says it needs for a long-awaited headquarters hotel development. The property, which holds a one-story office building, is owned by local real estate investor Barry Menashe.The city already owns the half block adjoining Menashe’s property, as well as a full block immediately to the south. Together, the two blocks are the preferred site for the headquarters hotel. The PDC recently sent out a request for proposals from those interested in the estimated $150-million project. Responses from prospective developers are due Dec. 10.Menashe paid $1.2 million for his property in 1988 and until earlier this year has kept it leased up, netting him about $250,000 per year, he says. Because of the suit, Menashe has been precluded from re-leasing or selling the asset. Informal negotiations between the two parties began more than a year ago. At that time, the city was offering $2.47 million for the property–slightly more than its appraised value–and Menashe was holding out for an amount much closer to the $5.2 million the PDC paid in 2002 for the neighboring property, a run-down former Best Western hotel that city is operating but plans to raze in favor of a headquarters hotel.Menashe says he has told the PDC he would accept $4.7 million and the city reportedly raised its offer as well, but the two couln’t get close enough, prompting the agency to file the condemnation suit last week. If the suit makes it to trial and the value determined therein is greater than the amount already offered by the city, the city will be held liable for the Menashe’s attorneys’ fees on top of the court-approved price. Menashe gives several reasons for the price he is seeking. Last year, Landmark Development of Texas wanted to purchase the property for $5 million, he says, but ultimately let its option slide after being unable to get the necessary entitlements from the city. As well, Menashe says he recently paid for an independent appraisal that valued the property at $5.4 million. Finally, Menashe’s property is the same size as the neighboring hotel property for which the PDC paid $5.2 million, and until recently generated more revenue, he says.Menashe believes the city is depriving him of a “huge” development opportunity. “I’m insulted by the city’s activities,” Menashe tells GlobeSt.com, adding that he has hired the local law firm Markowitz, Herbold, Glade & Mehlhaf to represent him in the matter. The PDC’s general counsel Chip Lazenby tells GlobeSt.com that despite Menashe’s emotional attachment to the property, the five-story hotel building appraises differently than the one-story structure on his property, regardless of whether the city plans to tear down the building. As well, Lazenby says Menashe no doubt had the opportunity to partner with one of the six developers submitting proposals to the city for a headquarters hotel, so he is not being deprived of the opportunity to develop the property. “We can’t make an offer based on the potential of the property,” Lazenby tells GlobeSt.com, adding that the city has in good faith tried to negotiate with Menashe for more than a year. “We’re trying to be responsible with taxpayer dollars; this (condemnation suit) really is a last resort.”The last time Menashe was caught in a condemnation situation, the matter was resolved before it got to court. In January 2003, Menashe was forced to sell a 10.3-acre, 100,000-sf development at Southeast 82nd and Division that he picked up in mid-2002 for $4.4 million. Menashe expected to own it for a long time, but shortly after acquisition the Portland Community College came knocking, dangling its eminent domain power and visualizing a new campus on the site. Forced to deal or end up in court, Menashe sold it to PCC for $5.7 million “plus other consideration.”