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Old Town rebound rattled by rules

Financial incentives to bring Chinatown buildings up to code could give district new life


by: TRIBUNE PHOTO: JONATHAN HOUSE - The old Rich Hotel was built in 1905. The Modern Richs apartments, newly renovated, were all rented out within three weeks of being listed.When Stephen Ying looks down Northwest Third and Fourth avenues he sees, as anyone would, a run of empty and near-empty buildings. But Ying, president of the Chinese Consolidated Benevolent Association, also sees beyond the decaying Chinatown structures to the people who own them.

“Even though the Chinese (residents) are not there, the tongs are there,” Ying says.

Vacant buildings can be found at about 20 addresses in the Old Town/Chinatown area. Many of the buildings have been empty or mostly empty for decades. Economists claim that people are rational, which would indicate the owners of those vacant buildings would sell their properties or fix them up if the right economic incentives were offered. But, Ying says, economics work differently in Chinatown.

The fate of Chinatown and most of those decaying buildings, he says, is still in the hands of mostly elderly Chinese men who just don’t want change. Without some compelling outside motivation, they could allow those buildings to deteriorate further.

Developers say that motivation will have to overcome what they consider the single greatest impediment to getting those Chinatown structures renovated: the city’s seismic upgrade requirements.

A few of the Third and Fourth avenue buildings are owned by Chinese families, but most are owned by tongs — fraternal organizations that can have as many as 100 members. Years ago, when Chinatown was vibrant, they ran a variety of businesses and social activities upstairs in those buildings, and restaurants or grocery stores downstairs.

Now, Ying says, a generation of mostly elderly tong members don’t have the formal hierarchy or the will to make decisions to sell or renovate. In many cases there is nobody with the authority to approve a bank loan for renovation.

Ying says city officials talked with members of the tong that owns the Suey Wing building on Northwest Fourth Avenue, vacant except for the Magic Garden strip club on the ground floor and a nightclub that was closed after a series of Oregon Liquor Control Commission violations. Renovation would require a seismic upgrade that would cost more than $1 million, a group of tong elders were told. Nobody was willing to step forward and agree to the work.

“They don’t want to be the ones to get the bad name if the project crashes,” Ying says.

Another abandoned Chinatown building on Northwest Third Avenue was raided by police, who found dozens of stolen bikes upstairs, according to Ying. Homeless people regularly break in and stay overnight at this location, owned by a tong.

by: TRIBUNE FILE PHOTO - Stephen Ying would like to see redevelopment in Old Town/Chinatown.“The tong makes money on 82nd (Avenue), so they don’t care about this old building,” Ying says.

They especially see little incentive as long as the building isn’t a financial burden, Ying says. And that’s the case, he explains, as long as a ground-floor nightclub, convenience store or restaurant can produce revenue to pay property taxes. Which is why Ying, who for years has worked to maintain a Chinese presence in Chinatown, says the city is going to have to resort to tougher measures if abandoned buildings in Chinatown are going to be remodeled and inhabited, or torn down and replaced.

First, Ying says, the city should offer incentives to building owners who might be willing to renovate. But then, he says, let the owners know that there will be consequences if they don’t renovate, even if that results in the city issuing fines and condemning buildings.

“We have to do something because they will never upgrade by themselves,” Ying says.

Create desire

by: TRIBUNE PHOTO: JONATHAN HOUSE - Developer Julie Garver shows off the voluntary seismic upgrade that made possible redevelopment of the Rich Hotel in Old town. Concrete and bolts were used to stabilize the buildings walls.Julie Garver is convinced that with the right incentives, nearly all the vacant buildings in Old Town/Chinatown could be redeveloped. And Garvey’s not just talking. She has evidence.

The Rich Hotel in Old Town had been vacant for five years when nonprofit developer Innovative Housing Inc. bought and began renovating the historic property in 2011.

Three weeks after The Modern Rich began leasing its 34 apartments last September, the building was fully rented. Yes, there are homeless people constantly meandering by the Rich’s Couch Street entrance. Yes, Entertainment District nightclubs create a rowdy atmosphere late into Friday and Saturday nights. And yes, the Rich’s studio apartments are tiny — 250 square feet each.

But the apartments, Garver says, appeal to the mix of students and young creatives who don’t intend to spend much time at home, and like being close to downtown, the new University of Oregon Portland campus and the Oregon College of Oriental Medicine. Rents are between $600 and $700 a month, utilities included, and are not publicly subsidized.

“There are people who want to be here,” says Garver, development director for Innovative Housing.

Garver feels certain that market forces, with a few government incentives, could persuade even those tong leaders to move on their properties. But first, she says, the city has to give a little when it comes to seismic upgrades.

“If the seismic requirement were addressed in a fundamental way, you would see those buildings redeveloped,” Garver says. Without a change in city policies, she adds, “several of those Chinatown buildings are coming down.”

Redevelopment of the Rich, according to Garver, was possible because Innovative Housing was able to avoid the triggers that would have required a full seismic upgrade. Those triggers, she says, don’t make sense.

One trigger requires a full seismic upgrade for most properties when the owner applies to change a building’s use, especially if the new use will result in more people living or working in the building. If an abandoned building such as the Rich was once a single-room occupancy hotel, developers can renovate it for apartments without having to perform a full seismic upgrade. But if the developer wants to turn it into offices with more workers present, for example, the trigger kicks in and the upgrade is required.

Seismic upgrades, in Garver’s view, should be based on safety. If a building needs to be retrofitted, how it is used shouldn’t matter. And if it is safe, changing the use shouldn’t trigger an upgrade.

by: TRIBUNE PHOTO: JONATHAN HOUSE - The Rich Hotels seismic upgrade included punching a hole through the historic buildings center to form a courtyard and strengthening interior walls with concrete.The other major trigger also has little to do with safety, Garver says. If a developer renovates a two-story or taller unreinforced masonry building such as the Rich for more than $40 per square foot, a full seismic upgrade is required. Again, Garver says, it makes no sense to base the need for retrofitting on how much the developer plans to spend. In fact, the current rule, she says, discourages developers from turning out nicer buildings.

A full seismic upgrade on the Rich would have cost Innovative Housing about $1 million, Garver says, and made the project unaffordable. But by creatively staying under triggers — keeping the building in housing and not spending too much on renovation — the nonprofit was able to get approval under the city’s voluntary seismic program. In the end that saved about $350,000, Garver says.

Innovative used a bit of innovative engineering to make the Rich safe enough, Garver says, by punching a hole through the building’s middle to form a courtyard. Engineers used concrete and bolts to strengthen and fasten the building’s walls.

But a voluntary seismic upgrade is not required to meet any specific safety criteria, so there is no guarantee that a voluntarily upgraded building would be safe enough should an earthquake strike.

The complicated process of getting city permission to perform a voluntary seismic upgrade is enough to scare off many developers, according to Garver. That process includes meetings with engineers, city planners and architects, and requires the developer to put up a significant amount of money they cannot get back if the request is not approved.

More projects in works

Innovative Housing is pushing ahead with plans to renovate two other Old Town properties, the historic Erickson Saloon on Northwest Second Avenue and the connecting Fritz hotel on Northwest Third Avenue.

The nonprofit intends to purchase the properties in January, but that project, Garver says, will require a full seismic upgrade that will cost about $1.5 million. The building’s total cost — turning the downstairs storefront into space for nonprofits and the two upper floors into 62 apartments — will run about $14 million.

The Erickson project will only be possible, according to Garver, because nonprofit Innovative Housing will get assistance from the Portland Housing Bureau and low-income housing tax credits. That means some of the Erickson’s apartments will be publicly subsidized, affordable housing. Garver says she prefers projects that don’t require a public subsidy, but that won’t be feasible given the full seismic upgrade costs at the Erickson.

Garver has recommendations that she says would help get nearly all the abandoned Old Town buildings renovated. First, she says, there should be a third category for seismic upgrades — something between a full upgrade for large buildings and the voluntary upgrade for smaller buildings.

In her view, this new middle category would require work similar to what Innovative did at the Rich — roof work and stairwell work, and “a certain amount of logical floor to wall tie-ins.”

This expanded voluntary seismic updating would be allowed even if a developer were to change the use of a building, as long as the safety of the occupants wasn’t compromised. In fact, she notes that prior to Innovative Housing taking on the Rich, another developer looked at the building hoping to turn it into office space. That developer couldn’t afford it, she says, because the change (and the potential for more people in the building) would have required a full seismic upgrade.

Garver says that if the city insists on keeping in place a cost of development figure for triggering seismic upgrades, she’d raise the threshold to $50 or $100 a square foot. Preferably, she says, the city should be looking at other criteria such as a building’s height, which has more of an influence on earthquake vulnerability than the money spent on renovation.

In addition, Garver would have the city streamline the application process so developers would not be discouraged from applying for the potential mid-level upgrade.

Doing nothing

But Carmen Merlo, Portland’s Bureau of Emergency Services director, isn’t ready to rush into a program that would increase the number of voluntary seismic improvements.

Merlo says that San Francisco requires retrofits for most of its old buildings and that Seattle is close to rolling out a mandatory program. She prefers something similar in Portland, with the understanding that the city would work with developers to make retrofitting “as painless as possible.” That might include waiving some permit fees and streamlining the permitting process.

“Those unreinforced masonry buildings truly are the most dangerous buildings we have,” she says.

Some cities pay a portion of the cost of safety upgrades, such as sprinkler systems, for vacant buildings being renovated. The cities are reimbursed by taking the money out of property taxes once the renovated properties become more valuable. A number of experts told the Tribune they were unaware of such a program occurring with a renovation item as expensive as a seismic upgrade, but that the concept might work for Portland.

“That’s not a bad idea,” Merlo says.

There are a multitude of ways cities can help finance seismic upgrades and later recoup the costs, says Michael Brady, vice president of policy for Washington, D.C., nonprofit Center for Community Progress, from tax abatement to tax increment financing. But allowing historic buildings to stay vacant indefinitely without seismic upgrades, Brady says, guarantees their fate whenever an earthquake does occur.

“If we do nothing, at some point all these properties will be gone,” Brady says.


Naito to sell, not rehab, Old Town buildings

The difficulty and expense of trying to improve Old Town buildings to current seismic standards has led the Bill Naito Co. to stop trying.

For decades, the Naito family has been among Old Town’s most prominent property owners. Judy VanAlstyne, property manager for the company’s Old Town portfolio, told the Tribune two weeks ago that the company had six remaining Old Town properties and had listed all of them for sale.

VanAlstyne, who has since died, told the Tribune that experience in Old Town has taught company leaders that “to seismically upgrade an old building does not pencil out.”

The Naito company sold the Rich building to Innovative Housing, which has since renovated it while avoiding a full seismic upgrade. It sold the Sinnott building after determining it was too expensive to repair. Both are unreinforced masonry buildings. As detailed in the June 13 Tribune, the Sinnott stands vacant except for a first-floor nightclub, and it is surrounded by scaffolding to protect pedestrians from falling bricks.