‘Game changing’ renovation of Clover Island Inn to micro-apartments faces 1 major hurdle

A company converting old hotels into micro-apartments in the Tri-Cities wants to invest millions in a revitalization of Clover Island, but a long-standing land policy may sink the deal.

Fortify Holdings is looking to spend more than $100 million to convert several Tri-Cities hotels into small high-end apartments, with three Tri-City natives helping guide the projects.

The Oregon-based company is ready to spend $20 million of that to buy and renovate the aging hotel on Clover Island and then invest in other commercial projects envisioned in the port’s master plan.

That master plan for the manmade island near the cable bridge calls for a special events viewpoint near the hotel, as well as more retailers, dining and mixed-use development.

It’s already home to Cedars restaurant, Ice Harbor Brewing, a Coast Guard station, the Clover Island marina and yacht club and a lighthouse.

But the Tri-Cities may lose out on tens of millions of dollars worth of more development because the Port of Kennewick has a longstanding policy of only leasing land on the island.

Fortify Holdings President Ziad Elsahili said told the port’s commission this week that his Oregon-based company wants to be a true partner in developing the island into a prime destination.

But they’re wary of investing so much money on land they aren’t allowed to own. And they don’t believe a long-term lease will suffice.

Hotel sale

March 31 is the deadline to close the deal on buying the hotel, valued at $3 million by the Benton County Assessor’s Office.

Crane company owner Bill Lampson co-owns the hotel with six other Tri-Cities investors. He told the Tri-City Herald this week that the hotel was not for sale but that they were approached with an offer they couldn’t refuse.

If the deal falls through, he doesn’t expect it to go back on the market, he said.

Elsahili said that as much as they believe in the value the Clover Island Inn could bring to the Tri-Cities community, it’s harder to justify investing so much without owning the land.

“We not only would want to do this project if we were able to get a foothold on the port like this, we would want to partner with you guys on seeing through your goals on this project that aren’t met,” Elsahili told the port commissioners. “We want to be developers across the board and … build partnerships for years to come.”

The hotel owners currently lease the land under the hotel with extensions available through 2034, which means it would only be about a decade after it was sold before the new company would need to negotiate a new lease with the port.

“We’re hopeful that the port recognizes the value that Fortify could bring,” Elsahili said.

He also addressed lingering community concern, assuring commissioners that they are not trying to turn the hotel into low-income housing. A proposal last year for some mixed-income housing in an area near the island drew a strong backlash from downtown Kennewick business owners and others.

Ahead of this week’s port meeting, residents contacted both the port and the developers, with questions and concerns about whether the Clover Island sale was similar or related to a grant proposal for the Willows Housing Development that never got off the ground.

Critical housing need

Fortify officials say they’re investing in Tri-Cities because of the critical housing need.

“We’ve identified places that really need the housing. We’re long-term investors, we’re committed to our local cities,” Elsahili told commissioners. “It’s really important to us to be entrenched in the community as we try to partner.”

To that end, the company has brought on Robert Jacobs as its regional manager. Jacobs said the Clover Island Inn was appealing in part because it was exactly the kind of project that would excite him as someone from here.

Jacobs grew up in the Tri-Cities and met Elsahili through his family’s real estate dealings in the area. Jacobs’ brother Daniel and cousin Brett also are part of the Tri-Cities outfit, which has its offices in the old Best Western Plus Columbia River Hotel in Richland.

“When you look at this project, a great way to describe it is as a catalyst for economic development,” Jacobs said.

The initial project will include a renovation of the Clover Island hotel into 180-200 high-end micro-apartments, set up as studios or 1-bedrooms.

The first floor of the nearly 45-year-old hotel will include retail shops and restaurants, to meet the port’s rule for 20% commercial occupancy.

Beyond that, they want to work on improvements to the nearby dock and walkways, and eventually partner with the port on restaurants and an entertainment venue.

The breakdown of the $20 million estimated investment has not yet been finalized because of the questions surrounding the land sale.

“We want to make it a real recreational and exciting hub on the island,” Jacobs told the Herald.

Like their other Tri-Cities projects, all of the commercial spaces, and even the pool, will be open to the public. They’re also planning a rooftop event space and beautification of the existing landscaping.

An example of this is that the large renovated pool and conference areas of the Best Western in Richland will be open to the public, and available for rentals for parties, events or company trainings. That property also will feature rooftop spaces for residents and the public to enjoy.

Upscale living

Jacobs acknowledged there has been some community concern over what a micro-apartment is.

He stressed that Fortify is committed to creating high-end living spaces with safe, vibrant amenities for their surrounding communities.

The renovation will start with the building, which some have called an eyesore. Jacobs said exterior updates to the building built in 1977 will help the island more closely match the exciting new vision the port wants to achieve.

The first step in that partnership, he said, is creating a project that benefits the entire community. All of their Tri-Cities properties will offer mixed uses, with event spaces turned into restaurants, retail and venue options.

“We’ll enhance the exterior, we’ll enhance the paint … and rebrand to make it something really iconic for the island,” Jacobs said. “We’ll work with local artists and architects to incorporate things the community values on the island.”

Jacobs said the company has an Eastern Washington-based mural artist they’ve worked with on several projects, but they’re also open to soliciting local talent to beautify the area.

“We want it to pop and really feel nice, like a place people want to live,” he said. “It’s really designed for working individuals, young professionals ...”

He said Fortify’s housing targets professionals, young couples, workers on one- to two-year contracts with major employers like Pacific Northwest National Laboratory and the Hanford nuclear site, and others moving to the area for work and struggling to find a nice place to live in such a tight housing market.

The hotel currently has 200 parking spots, and Fortify plans to work with the port to determine if adjustments are needed. The commission was concerned about parking because the master plan adopted in June 2021 uses the hotel’s parking to supplement parking for events. That parking might not be available with the apartments fully occupied.

“We will work with the Port to ensure public access is maintained .... This includes a brand-new event space for weddings and other functions. We also will maintain the summer concert series and work with the Port on developing an entertainment venue on the island to be utilized for these concerts and other public events,” Jacobs told the Herald.

‘Game changer’

Port Commissioner Tom Moak acknowledged that the port’s policy of not selling the land to developers has been, and could continue to be a barrier to their goal of revitalizing the island.

“Anytime I see someone wants to spend $17 (million) or $20 million around the port, my ears kind of perk up. Sometimes we have partners who only want a handout, but it sounds like you genuinely want to partner with the Port of Kennewick,” Moak said during the meeting. “I think (the land policy) is one of the things in the master plan that we’re going to have to overcome.”

Moak said he will take his cue on direction from port staff, but noted an investment of that magnitude may warrant a change.

Port CEO Tim Arntzen recommended that the port hire a contractor to research the issue closely, to explore any unanswered questions the commissioners have. He hopes to have that information to commissioners by the end of February.

Arntzen said he understands the time frame for Fortify to close on the project is tight, but the port needs to be thorough.

“I believe my quote in the last commission meeting, was that, ‘This project is a game changer, but I’m just not sure what direction it changes the game in,’” he said. “By that I mean this is a noticeable project. It is not one the commission should take lightly because the public isn’t (going to). This is a major project and needs to be treated as such.”

Arntzen told the Herald that one of the reasons he’d like a thorough review is to bring in an attorney that specializes in land use to go through the fine print of the use of the island’s property.

The land on the island is subject to a number of restrictions from the Shoreline Management Act and the Army Corps of Engineers.

The Clover Island Ecosystem Restoration project was created in 1986 as part of an endeavor to protect endangered and threatened species of salmon and create a living shoreline.

Jacobs said Fortify does not believe any of their planned renovations would impact those protected areas.

“We are not planning to change the footprint of the existing building and do not anticipate any issues with the Corp of Engineers,” he said. “As we work to develop the entertainment venue and other elements of the island we look forward to working with the Corps and other stakeholders on these exciting projects.”

Public concerns

Arntzen said he’s been receiving a lot of feedback from members of the public, even before the most recent commission meeting.

“I am surprised with the interest that this housing project has garnered with the public. From what I’ve seen in my 20 years at the port, this is one of the most commented upon proposals that the port is involved with,” he told the Herald.

“Why is that? I would guess that the public is getting more and more invested in Clover Island,” he said. “As the port has made more improvements, public use has probably quadrupled, I think the public is finding it’s a gem, and it’s available for public access.”

Arntzen said one of the primary concerns he’s fielding is whether these projects would restrict public access. There also is concern that the project could be related to a previous proposal to add low-income housing in the area.

Last year, as part of a grant proposal for potential Build Back Better funds, Senator Patty Murray suggested the port partner with the Kennewick Housing Authority for the Willows Housing Development to improve the port’s chance of being awarded money. That development was proposed on Clover Island Drive just south of the island.

The port was clear that the application did not mean they would be partnering to develop low-income housing, but the public backlash was fierce. That potential funding fell through, but the suspicion seems to be lingering.

Jacobs told the Herald that none of their projects in the Tri-Cities would be eligible for rent subsidies, and they are open to working with the port on wording in the sale agreement to reflect that.

Arntzen said the port has had positive comments on the potential for developments with fewer housing units such as townhomes.

Jacobs also told the Herald that one benefit of their projects is that turning these low occupancy hotels and motels into permanent housing units reduces crime and transient activity.

Their goal is to renovated existing facilities rather than building from scratch and to maximize value by creating living spaces with high-end fixtures and environment.

He notes that the Tri-Cities is one of the most difficult markets in the nation to rent or buy, with vacancy rates hovering around 3 percent.

At the same time, builders in the Tri-Cities are having trouble keeping up with the demand for new homes. According to the Tri-City Association of Realtors, homes spent less than 20 days on average for sale in the Tri-Cities in December.

Fortify Holdings

Fortify Holdings operates more than 6,500 residences across 65 properties in Washington, Oregon, Idaho, Nevada and California.

They currently are working on seven Tri-Cities projects. Jacobs said they are committed to being long-term community partners and have never sold a building.

They boast an average 98% occupancy rate across their properties.

They hope to open several properties by Fall 2022, including the Richland Best Western Plus Columbia River Hotel, which will be called The Franklin, and the former Quality Inn in Kennewick, which will be known as “The Q.”

As they’ve been renovating Tri-Cities properties, the group has been donating the old furnishings to Habitat for Humanity.