Portland developers hope to build a $43 million hotel in downtown Salem, if they can raise enough money through a so-called opportunity zone that gives investors tax breaks to help pay for economic development projects.

The proposal "is for a 123-room hotel, with a lobby bar and a rooftop bar," said Kristin Retherford, Salem's urban development director. "It will be a suite-style property with studio and one-bedroom suites designed for extended stays."

The proposed location, 195 Commercial St. SE, is an old parking structure across the street from the Salem Convention Center and near Salem's Riverfront Park.

Records show Chris Duffin, president of LMC Construction in Tualatin, purchased the property for $550,000 through CJD Holdings in March.

"He asked us to take a look at it for him as a potential developer," said Vanessa Sturgeon with Portland-based Sturgeon Development Partners.

Sturgeon said a hotel study they commissioned showed a clear need for more hotel rooms in the area.

The hotel will be geared toward serving legislators, business officials and people who come into town as adjuncts for nearby colleges but don't want an apartment, she said. Sturgeon said it was too early to tell what the room rates would be.

Retherford said the hotel proposal already went through a pre-application conference with the city and goes before Salem's Historic Landmarks Commission on Dec. 20. The commission issues advice on historic structures and sites to the Salem City Council.

"The project will also require historic design review before the Historic Landmarks Commission and a separate application for site plan review," city spokesman Kenny Larson said. "Neither the historic design review or site plan review applications have been submitted yet."

"We're in a position to demolish that parking garage as soon as we have a permit to do so," Sturgeon said.

Larson said developers have applied to demolish the structure.

Sturgeon said groundbreaking for the project depends on how long Salem takes to process permits.

Developers seek to bring $43 million hotel to downtown Salem at the i7293ad4a-6d56-42d5-becf-8d81f5b56d47-Downtown_Development_ar_01_1544311426061.jpg
Developers seek to bring $43 million hotel to downtown Salem at the intersection of Commercial St. SE and Ferry St. SE. Photographed in Salem on Thursday, Dec. 6, 2018.
ANNA REED / Statesman Journal

Sturgeon also is looking at building a mixed-use tower in Portland as part of their qualified opportunity fund proposal.

"This is an opportunity to combine investing and tax incentives with revitalization of underdeveloped neighborhoods," Sturgeon said.

"Redevelopment of these sites will remove the existing structures, which are unsightly and dangerous, create hundreds of construction jobs for Oregon, and provide much-needed space for commercial and residential use," she said.

Opportunity zones, part of the Tax Cuts and Jobs Act that became law in 2017, encourage development by basically giving investors a capital gains tax break. The Internal Revenue Service has called the zones an "economic development tool."

Development officials say with the approximately $330 million fund for the Salem and Portland projects, investors will become part of a limited liability company that retains ownership of the projects.

Sturgeon said to build the Salem hotel, they need to raise $25 million through the qualified opportunity fund. The rest they can drum up through other sources.

Investors have until March 31 to commit money. "We have had money committed," Sturgeon said, though she declined to disclose how much "because it's a securities offering."

Oregon has opportunity zones spread across the state, from Salem to Medford to Klamath Falls, according to Business Oregon, the state's economic development agency.

Two developments near the proposed Salem hotel site received taxpayer subsidies through Salem's Urban Renewal Agency.

The Park Front office building at 235 Front St. SE was completed this year, and The Court Yard apartment complex at 245 Court St. NE, which is expected to finish in early 2019.

Retherford said developers haven’t asked for urban renewal funding to date, but “I wouldn’t rule it out in the future.”

Email jbach@statesmanjournal.com, call (503) 399-6714 or follow on Twitter @jonathanmbach.