A coalition of Portland nonprofits and neighborhood groups now owns an infamous triangular lot in the Cully neighborhood that housed a hodgepodge of adult businesses for more than a decade.

Since 1998, the Sugar Shack strip club had anchored a string of now-closed adult businesses steps away from a pediatric health center, hundreds of apartments, and bus stops serving children in the diverse and low-income area.

Related story: Read about how much the land was worth and what appraisers say is the best way to use the land.

A photographer for The Oregonian/OregonLive allowed inside the building Tuesday saw a discarded condom wrapper, leopard-print bathroom walls, and a hot tub.

The coalition -- Habitat for Humanity Portland/Metro East, Hacienda CDC and the Cully-based nonprofit Verde - formed a company called Living Cully Plaza and paid $2.3 million for the 2.19-acre parcel last week. The group used more than $2 million in public and private loans, plus a crowd-funding effort that brought in $65,000 from more than 500 donors last December.

"The community has advocated for this site to be improved for so long," Tony DeFalco, Living Cully coordinator said. "It represents such an enormous milestone getting to this point."

The new owners have yet to decide whether to convert or tear down the 25,991-square-foot building. Living Cully said in a news release that it plans to work with residents to come up with a plan for a "positive space that benefits the neighborhood."

DeFalco and city officials say the buildings and clientele - at the intersection of U.S. 30, Northeast Killingsworth Street and Cully Boulevard - were an eyesore.

The building stands out, with black-and-white checkered patterns along some walls, aluminum-sided reflective walls and large silhouettes of naked women adorning signs.

DeFalco added that residents felt unsafe around that block for years. The building's owners were accused in a strip club-related IRS and prostitution conspiracy still in federal courts. IRS criminal investigators raided homes and businesses in 2010, seizing $843,000.

One of the owners, Kandace Desmarais, and her brother, Gilbert, pleaded guilty to conspiring to promote prostitution and defraud the IRS in May and await a sentencing hearing set for Sept. 9. She and the other two property owners couldn't be reached for comment.

In a statement, Mayor Charlie Hales praised Living Cully for its grass-roots effort. "They've taken a big risk," Hales said, "both financially and in terms of community expectations. I know the same tenacity that led to the purchase of the property will result in successful reuse of the property."

Cully residents had asked about buying the property for years, but it wasn't for sale until last year. Now, whatever plan the coalition comes up with will have to be a moneymaker.

Living Cully received a $200,000 grant from Meyer Memorial Trust and a $25,000 grant from the Oregon Community Foundation, but most of the purchase price came from loans.

Craft3, a Northwest nonprofit community development financial group, loaned $2.3 million. The Portland Development Commission chipped in a $250,000 loan.

DeFalco said it's too soon to say how the coalition will repay the loans but added that it needs more money from both the private and public sectors.

"We're looking for partners. This is a big project," he said. "It's a big lift for our community."

Jillian Detweiler, Hales' policy director and liaison on PDC issues, acknowledged the group is "heavily leveraged."

Community Celebration

On Aug. 4, Living Cully plans to hold a community celebration on the property then kick-start plans to redevelop the site.

Location: 6723 N.E. Killingsworth Street

Time: 4-8 p.m.

"Their agreement with Craft3 requires they develop a redevelopment plan that's a path to permanent financing," Detweiler said. "We want to be supportive of that."

Living Cully asked Hales' office for $500,000 in the 2015-16 budget cycle. Instead, it received the $250,000 PDC interest-deferred loan from 2014-15 general fund money, according to John Jackley, PDC director of communications and social equity.

"We're thrilled to help the community leaders remove this eyesore," Jackley said.

The Living Cully property is outside an urban renewal area so it can't receive tax-increment financing. It is covered by the PDC Neighborhood Prosperity Initiative program, which has less money for redevelopment.

But it could be a good fit for a new $750,000 community development fund, created by the City Council "in response to projects like the Sugar Shack," Detweiler said Organizations can apply for funding through the PDC.

She added: "It's intended to make tough projects go."

-- Andrew Theen

atheen@oregonian.com

503-294-4026

@cityhallwatch