McMenamins to crowd-fund Bothell, Wash., venture

From left, McMenamins co-founders Brian and Mike McMenamin and chief financial officer Larry Dortmund. The Northwest chain of brewpubs and entertainment venues, is for the first time taking on outside investors -- as many as 30 -- to finance a new location in Bothell, Wash.

(Beth Nakamura/The Oregonian)

Any discussion of a historic building in Oregon that’s threatened will inevitably work its way around to

.

The chain of brewpubs and entertainment venues, famed around the Northwest for renovating and reinventing historic sites, gets inquiries just about every month — some serious, some idle — asking it to look at an old building somewhere.

McMenamins Inc.

Founded:

1983

Ownership:

Family-held

Employees:

2,200 at seasonal peak

Locations:

52 in Oregon and Washington

Revenue:

More than $100 million

"Obviously, you can't do everything," says Mike McMenamin, who co-founded the company with his brother Brian in 1983.

But when the city of Bothell, Wash., came to the company in 2009 with a potential site in a former school complex, McMenamins went ahead with what would become one of the company's most ambitious projects.

And for the first time,

in a crowdfunding venture that, if successful, could prove to be a model for more growth in the future.

The project in Bothell, just north of Seattle, would transform the W.A. Anderson Building (actually a complex of six buildings on a six-acre site) into a hotel, brewpub and theater.

The project comes as Bothell attempts to bring more life to its downtown. The city has spent $95 million for downtown infrastructure improvement in hopes of unlocking more private investment.

The city called McMenamins around the time it bought the vacant site from the Northshore School District. McMenamins and three other developers offered concepts for the site, city manager Bob Stowe said, but McMenamins presented the only proposal that didn’t call for a subsidy or for the city to use the site — as its city hall, for example.

“McMenamins definitely fit perfectly with the vision,” Stowe said. “I don’t believe another possible tenant or end user could produce the same draw and the same sort of stimulus to the community.”

The redevelopment — which will comprise a 73-room hotel, restaurants and bars, on-site brewery, meeting space, a pool and a spa — will be similar in scale to McMenamins’

or

complexes, but those projects were developed in phases.

McMenamins Anderson School plans 15 Gallery: McMenamins Anderson School plans

“This is one-shot deal,” McMenamin said. “All the complimentary pieces need to be in place.”

So McMenamins is for the first time seeking partners to help finance the development. At first they sought just one investor who could kick in the entire $8 million needed to get the project off the ground.

But five or six times, those talks unraveled. So “out of frustration,” McMenamin said, the company started looking at the crowdfunding model.

Crowd-financed real estate development is a fairly recent development, spurred by a 2012 law that allows companies to advertise investment opportunities directly to potential investors.

Some firms have already popped up to facilitate real estate investment in the style of

, the leader in the crowd-funding space. Notably, the developers behind a proposed Portland office building called The Dumbbell near the east end of the Burnside Bridge are using the website

to

.

But unlike donors on Kickstarter and similar platforms, where contributions are largely charitable ventures, sometimes in exchange for token gifts, real estate investors get an ownership stake that comes with potential for revenue and risk.

McMenamins opted to handle their offering in-house. It’s looking for a group of investors to raise $8 million of the equity in the $26 million redevelopment.

McMenamins will put in $1 million and act as managing partner, and

will lend $17 million for the project.

Investors will receive shares in the limited liability corporation that will own the property. They are promised an 8 percent a year return from rent paid to the LLC by McMenamins, as well as additional return if it appreciates in value and benefits from historic rehabilitation tax credits.

They also get special pricing on hotel stays and events at the Anderson School, as well as other benefits.

The minimum investment is $250,000, and participation is limited to “accredited investors” worth at least $1 million or who make more than $200,000 a year.

"We really hope there are people who are really interested in how the community develops," McMenamin said. "In the end, I think it's a lot more fun when you have a lot more folks who really know what you're doing and believe in the community investment. Your investors are your fans, and feel like they’re part of the project."

But other investors might be fans of the McMenamins concept who want to be a part of at least one of its projects.

“It could definitely unlock a pool of equity that we could tap into and help future expansion,” said Larry Dortmund, McMenamins’ chief financial officer.

The company also has a lot of growing to do on sites it already owns.

Next to its

in North Portland, which serves as the chain’s headquarters, it owns an old Masonic Temple awaiting renovation, acquired in 2007. And it

a pig farm across the street from its Edgefield entertainment and lodging complex.

"We have several projects in Oregon that we'd like to get a jump-start on," McMenamin said. "If this works out well here, we'll certainly entertain that notion with those."

-- Elliot Njus

This story has been updated to reflect the following correction:

McMenamins is negotiating to acquire a pig farm near its Edgefield entertainment complex for an expansion project, but has not yet bought the property.