A Portland company has run into two big problems in its plan to convert top-tier Tri-City hotels into micro-apartments for working professionals, retirees and everyone in between.

While Fortify Holdings LLC has made several local purchases, its plans for the Riverfront Hotel in Richland and the Clover Island Inn in Kennewick hinged on buying not just the buildings, but also the land they sit on, which is leased to public entities.

The Riverfront, formerly the Shilo Inn, occupies a site leased from the City of Richland. The Clover Island site is leased from the Port of Kennewick.

Fortify offered to buy both sites, saying it needed to own the land to justify the investment in updates. Both entities refused and she intends to pursue both building purchases anyway.

Founded in 2018 by a group of homebuilders, Fortify focuses on multi-family residential properties. He pivoted amid the pandemic to hotel/motel conversions, seeing an opportunity in the high demand for accommodations in the Pacific Northwest.

He bought several hotels in the area to convert. But the Riverfront and Clover Island properties have attracted an exceptionally strong public response due to public land ownership and unique waterfront locations.

The company believed the opportunity it represented overcame the challenge of not owning the land below it, said Tri-City-based Fortify regional manager Rob Jacobs.

“We saw a great opportunity to create more housing in a market that desperately needs it and to be an economic catalyst with the Riverfront Hotel and Clover Island Inn,” he said.

Fortify’s projects are financially independent of each other and the company does not use tax credits. Units are rented at market rents, which means they are not low-income or subsidized.

Jacobs said he expects his Tri-City properties to operate at around 95% capacity, in line with his more traditional apartment communities.

Jacobs confirmed his intention to sue the hotels even if the land is not sold. He is working with Kennewick authorities to determine how to operate within zoning codes. Richland, on the other hand, warned him that the terms of the 1961 ground lease prevented him from converting the Riverfront, formerly the Shilo, into rental apartments.

Richland’s elected leaders discussed the potential land deal privately in 2021. But the Kennewick Harbor Commission discussed the matter in open session in January, offering a clearer view of its thinking.

The curators were intrigued by Fortify’s $20 million vision to transform the aging hotel into a residential and tourist destination. They said they wanted to work with Fortify on a ground lease that he was happy with.

But in the end, their hands were tied by the Clover Island master plan, said executive director Tim Arntzen. The guiding document is unambiguous: the port will retain ownership, with the exception of the site it sold for a US Coast Guard station.

The plan, adopted in 2021, was developed through a lengthy public process that cost around $250,000.

The Kennewick commission voted 2 to 1 to reaffirm its policy of not selling land on Clover Island. Commissioners Skip Novakovich and Ken Hohenberg voted to affirm the pledge not to sell land, but said they wanted to continue working with Fortify.

Commissioner Tom Moak was also intrigued by the fact that a private company wants to implement some of the ideas in the master plan.

“In the eight years I’ve been on the commission, we’ve had no one but the port and public partners willing to invest (in Clover Island),” he said.

Richland’s board discussed Fortify’s offer in a late 2021 executive session,

Although it has taken no public action, the council advised Fortify in writing on December 21, 2021 that it would not accept the offer to purchase the land. The letter attempts to strike a conciliatory note, but warns Fortify against converting the Riverfront into apartments. This could be a violation of the terms of the 1961 lease which controls the use of the land and its zoning.

“(L)tity encourages Fortify Holdings LLC to pay close attention to its future actions regarding 50 Comstock Street. Once again, City Council welcomes Fortify’s investment and development interest in the City of Richland, and looks forward to the redevelopment of properties Fortify has already acquired,” he said in a statement. a letter signed by former Richland Mayor Ryan Lukson.