The developers rejuvenating the Grove Hotel in Portland's Old Town Chinatown neighborhood are proposing to transform the longtime eyesore into a nine-story building, making it one of the historic district's tallest buildings.

Bob Naito, head of Naito Development and part of the prominent Portland family, said his group's original plan to rehab the derelict city-owned hotel into a trendy 70-room international hostel didn't pencil out.

Now Naito's project team, which includes New York-based financier Eagle Point Hotel Partners, plans a 112-room "lifestyle boutique hotel" that would reach a height of 100 feet. The project budget, once $7.5 million, is now approaching $25 million.

The Portland Development Commission chose Naito Development last May to revive plans to redevelop the hotel. An earlier deal to convert it into an Asian-themed hostel fell part despite the PDC's offer of millions of dollars in loans and a steeply discounted building sales price.

"We'd like to start construction this summer," Naito said this week. First, the developers need the blessing of Portland's Historic Landmarks Commission at an April 13 meeting.

The prospect has Naito, a Portland native with long ties to Old Town, excited. Neighborhood leaders are thrilled, too. The hotel, built in 1907, has long been viewed as a potential "catalytic" site that could spur more investment and construction in Old Town.

The Grove Hotel: Timeline

1907 - Hotel is built

2007 - Home Forward (then Housing Authority of Portland), buys property from Morris Hasson for $1.8 million (funds provided by PDC)

2010 - PDC buys and renovates hotel for $3.7 million

2011 - Deal developed with David Gold and partner to redevelop hotel, with $2.4 million in PDC loans and $550,000 sales price

2013 - Deal falls apart, some developers blame Right 2 Dream Too for scaring away proposed retail

May 2014 - PDC selects Naito Development team, application requires developers to disregard how presence of R2D2 could affect project success

(source: The Oregonian archives, city documents)

"You need sparkle when you're trying to energize a neighborhood," said Jane DeMarco, executive director of the Lan Su Chinese Garden and a member of the Old Town Community Association. "You just need that sparkle. I think it's big enough to do that."

The Grove Hotel is on West Burnside and stretches the block between Northwest Fourth and Fifth Avenues. On Fourth Avenue, the building is across the street from the Right 2 Dream Too homeless community and right at the base of the Chinatown gate.

Naito said construction crews would like to use the R2D2 site as a staging ground, to limit traffic closures on Burnside Street.

"It would really help us if they could find a home before then," Naito said.

The homeless camp has been on the prominent corner since October 2011. Last February, the Portland City Council approved a plan directing $846,000 from the sale of a Pearl District parking lot to help the group find a new home.

Background

The PDC bought and partially renovated the hotel, long viewed as an eyesore, fire hazard and rodent-infested presence at the gate to Chinatown, for $3.7 million in 2010.

The city planned to sell the property to a team of investors led by Old Town developer David Gold. But in March 2013, the deal unraveled. The PDC expected to sell the property to Gold and partners for $555,000, plus an additional $2.64 million loan.

When the PDC asked for more collateral from the investors, the other investors balked.

Now the economics of the corner appear to have improved.

According to a signed agreement, Naito's group will buy the hotel for $630,000. The deal closes March 1.

Last summer, the City Council approved a five-year action plan for Old Town that would funnel tens of millions in urban renewal dollars for seismic retrofitting, business loans and other assistance. But Naito said the Grove project is privately funded.

DeMarco, executive director of the Lan Su Chinese Garden, said she has her fingers and toes crossed" that the Landmarks Commission approves the project.

"We are so excited in the neighborhood. We're excited because that's not an attractive building right now, and it hasn't been for many, many, many, many years."

According to city documents, the proposed nine-story "skinny" tower would be on the Fourth Avenue side of the property, maintaining the three-story height along Burnside. Naito said the height isn't an issue, citing the 42-story U.S. Bancorp tower just across Burnside.

Naito's plan includes a ground-floor restaurant and other retail, plus a rooftop bar with views of the Willamette River and downtown.

"It's just going to be stunning," Naito said.

-- Andrew Theen

atheen@oregonian.com

503-294-4026

@cityhallwatch