Mike and Brian McMenamin talk about the extra millions that will go into the heavily damaged old Elks Temple that they're redeveloping into a restaurant, hotel, brewery and performance space. Peter Haley phaley@thenewstribune.com
Mike and Brian McMenamin talk about the extra millions that will go into the heavily damaged old Elks Temple that they're redeveloping into a restaurant, hotel, brewery and performance space. Peter Haley phaley@thenewstribune.com

Business

McMenamins might not rescue Old City Hall after all

July 21, 2017 7:00 AM

Almost two years after Tacoma first danced with the dream of a grand McMenamins footprint in Tacoma, one part of that vision is tiptoeing away.

Both parties have agreed it was in Tacoma’s interest to seek other developers for the renaissance of Old City Hall, The News Tribune confirmed Thursday.

Tacoma has sought to finalize agreements with the Portland-based developers throughout the past year, but company representatives have said they “were not in a position to go ahead” with Old City Hall, said Elly Walkowiak, the city’s business development manager.

“They indicated they are still very interested,” she said. “They love that building, but the timing right now isn’t going to work.”

McMenamins’ project to rehabilitate the nearby Elks Lodge into a 45-room hotel is still on track, for now, with construction to begin by the end of this year, chief financial officer Chris Longinetti said Thursday.

“We completely understand what the city needs to do on Old City Hall,” Longinetti said. “We are supportive of the city as far as getting that property into productive use.”

The company always made clear it wanted to complete the Elks development before starting on Old City Hall, which it envisioned becoming a 60-room hotel and entertainment venue, much like its other properties across the Northwest.

McMenamins put the Old City Hall project on pause last year as it sought more investors to rehabilitate the Elks Lodge. For months, the city has quietly shopped Old City Hall to developers and investors.

“(McMenamins) said if others demonstrate interest and you are interested in working with other developers that would be all right with them,” Walkowiak said.

Though some have toured the building, so far no other developer has suggested a greater commitment, she said.

The city bought Old City Hall in 2015 for $4 million after its previous owner, George Webb of The Stratford Group, allowed the building to fall into disrepair — so much so that the city designated the landmark, built in 1893, as a “dangerous building.”

After the city received three serious proposals for developing the site, the City Council selected McMenamins as the top choice in late 2015.

HOW WE GOT HERE

McMenamins bought the Elks Lodge in 2009. Since then, Tacoma has waited as the company weathered the recession, then moved ahead on the Anderson School in Bothell, which opened in fall 2015.

McMenamins had to complete the Bothell project first because it was owned by the city, which set performance deadlines as a condition of the sale.

Brian McMenamin told The News Tribune in 2015 that the Elks project could open in spring 2017.

Meanwhile, a Port of Kalama project was added to the McMenamins’ development list in March. That plan calls for a Hawaiian-themed hotel and brew pub. Its website lists a winter 2018 opening.

“Because of the port’s involvement (in building the hotel’s shell), that will give us the capacity to launch Elks” at the same time, Longinetti said in March.

Cost estimates for the Elks Lodge’s renovation climbed as the company learned more about the building and its condition. The company had once thought renovating the lodge would cost around $25 million.

Last year, contractors cleared out tons of garbage, asbestos and lead paint from the structure and its adjacent annex. At that time, the company said it would cost about $32 million to renovate the lodge.

WHAT’S NEXT

Walkowiak said the city is most interested in seeing Old City Hall renovated into office space or a hospitality use, such as a hotel. The city also wants to recoup its $4 million purchase price.

Mayor Marilyn Strickland has said she’d like to see the building used for office space, because that’s badly needed downtown.

But, “at this point,” she said, “I’m open to someone investing in the building and activating it so it’s being used.”

The building’s historic status means it will need some investment but it’s in relatively good shape, Strickland said, because the city has kept control and it’s been maintained to an extent.

Developer Mike Hickey with Neil Walter Co. said a residential project likely would recoup a developer’s costs.

“The fundamentals that dictate whether a project can be successful or not are much better in the residential category than in the office category based on today’s market in Tacoma,” he said.

However, local developer Grace Pleasants said she doesn’t believe the economy has improved enough for the city to recoup its $4 million cost into the property.

Pleasants, of Tacoma’s The Boulevard Group, was involved in a competing proposal when the city selected McMenamins in 2015. The Boulevard Group proposed a Starwood Aloft hotel at Old City Hall.

Reached Thursday, she said she approves of the city shopping the property.

“Old City Hall definitely deserves a brighter future, and I think development is timely,” she said. “Tacoma seems to be coming around.”

News Tribune archives contributed to this report.

Kate Martin: 253-597-8542, @KateReports

Debbie Cockrell: 253-597-8364, @Debbie_Cockrell

Candice Ruud: 253-597-8441, @candiceruud

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