A rendering of the 140-unit housing development that will replace the former Sugar Shack strip club. (Salazar Architect Inc.)

The black-and-white checkered Sugar Shack is coming down, three years after a coalition of Northeast Portland neighborhood groups banded together to buy the strip club as its owner faced federal prostitution and tax fraud charges.

One of the groups, Hacienda Community Development Corp., plans to start construction next year on a 140-unit affordable apartment project at the site on the corner of Northeast Killingsworth Street and Cully Boulevard.

The demolition work, set to begin Monday, marks the end of a site that was considered a blight on the neighborhood since it opened in 1998.

"It's about showing the community they can aspire to more," said Ernesto Fonseca, Hacienda's chief executive. "It's simply little by little changing the landscape of what our communities are used to seeing."

More: What happened to Cully, the neighborhood that was supposed to stay affordable?

The Sugar Shack sits across from hundreds of apartments, including many operated by Hacienda.

It attracted frequent calls for police, and owner Lawrence George Owen was convicted last year of running a massive prostitution ring out of his 10 strip clubs and adult video stores.

The property went on the market in 2014. Neighborhood groups including Habitat for Humanity Portland/Metro Northwest and Verde, under the umbrella of the anti-displacement organization Living Cully, scraped together $2.3 million to buy the 2-acres site in 2015.

The group explored using the existing building as a warehouse or as a kitchen for food production, but the costs proved too high. An appraisal commissioned by the city's urban renewal agency, Prosper Portland, found it to be in "fair to poor condition" with little practical use. The agency provided a $250,000 loan to the groups toward the purchase.

Hacienda bought out its partners late last year and started planning for the site's redevelopment as "Las Adelitas," named for women who fought in the Mexican Revolution. The new development will include an indoor community space and a large outdoor plaza.

-- Elliot Njus

enjus@oregonian.com; 503-294-5034; @enjus

A photographer for The Oregonian/OregonLive was allowed into the Sugar Shack site shortly after it was acquired by a coalition of community groups. Here's what she saw:

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