Things looking up for downtown pit.

Byline: Edward Russo The Register-Guard

Meet Thomas Kemper and Ronald Skov - a pair of Portland developers who want to be Eugene pioneers.

Kemper and Skov are willing to invest $500,000 of their own cash - plus millions more in borrowed money - downtown, hoping there will be demand for condominiums on West 10th Avenue, across the street from the Eugene Public Library.

"That's a problem with being a pioneer," Kemper said. "You take some risk."

The stakes are high for Kemper and Skov, and the city of Eugene, which has tried for more than three years to get the property redeveloped.

The land once housed the former Sears store, which the city razed last year, leaving a pit where the basement had been.

Kemper and Skov formed TK Partners to submit a bid to build 106 condo units on the city-owned land. Their proposal was one of three received by the city last month to redevelop the nearly half-block site, and it's the one city staff members prefer.

The partners estimate that it would take $24 million to build the complex. Their concept calls for studios, two-story lofts and town homes, plus a 3,500-square-foot restaurant. Besides the developers' own money, a Portland real estate investment banking firm is to invest $4.4 million. For the rest, the developers plan to ask Bank of America for a $19 million construction loan.

The City Council on Wednesday appeared ready to pick TK Partners to redevelop the site over two other Portland developers, Sockeye Development and Beam Development.

But only five of the eight city councilors were present to review the proposals, so they decided to wait until Monday, when all of them are expected to attend.

The decision is "a big deal," said Councilor Gary Pape, who called for the delay.

After the meeting, Mayor Kitty Piercy told Kemper and Skov that "there appears to be broad support" for their proposal.

Kemper told reporters that people "all across the country are moving back downtown, and we think that it's time for that to happen in Eugene."

If the partners build their project, they would follow in the footsteps of Jean Tate of Eugene, whose investment team built The Tate condominiums at 13th Avenue and Olive Street. Kemper said The Tate shows there is demand for owner-occupied downtown housing. But he said more research is needed to gauge the depth of the market.

To help create demand for their condos, the developers plan to build relatively inexpensive units - some as small as 600 square feet would sell for about $200,000. Larger units could sell for about $325,000, the developers said.

Kemper and Skov hope they can sell all the housing units and retail space for $27 million, which would give them and the other investors a $3 million profit.

The profit is "sufficient" to warrant the investment, the developers' proposal said.

City staff members and the Eugene Redevelopment Advisory Committee had recommended that TK Partners get the nod.

The three rival development proposals involved different requests of financial help from the city, such as price breaks on the land, fee waivers and loans.

TK Partners' proposal became the favorite because it would help achieve the city goal of downtown housing through a "relatively straightforward" and credible financing plan, said Denny Braud of the city's Planning and Development Department.

Kemper and Skov, who have extensive development experience in the Portland area, propose to buy the city property for $192,000 - or $778,000 less than the appraised value.

The developers also asked for 10 years of property tax breaks, which the city awards qualified downtown housing projects.

The other two development proposals - Sockeye's affordable rental housing project and Beam's retail, hotel and housing concept - had strengths but financial weaknesses as well, Braud said.

Sockeye's plan had a $3.36 million funding gap, even after the developers proposed to buy the property for $870,000 less than market value, and required subsidies and tax breaks. Beam's proposal was hampered by the firm's lack of experience in similar projects, plus the developers' desire to wait until the project was built and sold before paying the city the $970,000 sale price. Beam also requested a city loan of $2 million to $2.75 million.

If the council approves on Monday, city staff would enter into a 90-day negotiating period with Kemper and Skov to finalize the sales price, the date for construction to start and other details, Braud said.

Before they make that decision in an open meeting, councilors are expected to gather behind closed doors to discuss what staff should seek in the negotiations.

Councilor Betty Taylor said she favors TK Partners' proposal. But she said if the city is going to subsidize the project, it ought to get something in return, such as a theater or art space. Noting that TK Partners plan for 3,500 square feet of retail space, Taylor said, "If we give a subsidy, then the community ought to get what it needs, not more retail space."