OPINION: MCMINNVILLE GWENDOLYN HOTEL & THE MACK THEATER PROPOSALS
The proposed $60 million Gwendolyn Hotel in downtown McMinnville, which has asked permission to demolish three designated historic buildings within the Downtown National Historic District, has created a great deal of controversy. This has resulted in the possible denial of the permit by the Landmarks Commission. The Woodworth Fund happens to be two blocks away from this proposed development. Most communities would give their eye teeth for this type of development, but McMinnville is not any old historic community. The influx of wine tourists, while revitalizing the downtown with $2,100 two-night minimum hotel rooms and $1000 dinners has created a backlash from locals who feel disconnected, pressured with unaffordable housing options, and a downtown that lacks relevant local options. It appears we need to reimagine the future of downtown and provide for everyone in a way that protects our local sense of community.
To continue to flourish, the downtown will need to grow and adapt, otherwise it will die like it did in the past. Wine tourism and the wine industry is what brought downtown back to life and what will help it grow in the future. A $60 million investment shows confidence in the future of our downtown. Downtown is no longer the location for local everyday needs as evidenced by its bigger retail uses, car centric land uses, and crowded parking lots on the edge of town. At the same time, downtown needs stronger connections to the local community as it grows. More development proposals are coming. We need a shared community vision.
As some of you may know, Drew and Quinn of the Woodworth Contrarian Fund explored redevelopment of the Mack Theater, a prominent building that some would say is the core of downtown with a history that connects it to the wider community. The Theater has since been bought by a local group who have been exploring options that would protect its history and bring it back to life. We would like to share our earlier vision for the Mack as a roadmap that could be explored as an option for a possible redesign of Gwendolyn and other developments that are coming.
As you can see, we also proposed a six story portion, but at the same time kept the historic structures intact inside the National Historic District to protect the historic fabric (keep in mind we had not yet fleshed out the facade design on the new back portion - it needed more thought). Our redevelopment would have had available retail spaces on the first floor, a dinner theater in a reduced theater space, and 70 rooms of varying sizes in the renovated Yamhill Hotel including the upper levels of the new construction in the back (the one story non-historic Macy building would have been removed). We also wanted flexibility in the use of the rooms that could meet a variety of housing options from short term rentals to longer term rentals for local residents, based on seasonal needs (the rooms varied from traditional hotel rooms to larger suites with full kitchens with full suites with living and dining rooms). We wanted more than tourists downtown - we wanted local people to actually live downtown.
This desire for a variety of housing options complicated the project due to code parking requirements at the time, which required parking if we did anything except a hotel or short term rentals (the City has since amended the code to allow this more “mixed housing option"). Not only did we need parking to make this work, we knew that many in town complained about not being able to park conveniently downtown already. As part of the development, we proposed a parking structure that we would not only contribute money to ($500,000 with a floor for our use), but also meet the needs of the wider community. The slide from our development deck is below.
The total cost of the proposal, including a $500,000 allocation to the new downtown parking structure, was just under $18 million with an attractive cap rate of 12.41%, and a hefty projected increase in the future value of the project (there were ways to enhance the returns if needed to reduce risk). The development did not rely on or need public subsidies (although the City did talk to us about some options that were available - the City was very helpful). We were in discussions with an experienced development partner here in Oregon who could have funded the project. However, given it was in the middle of the pandemic, plus complications with the city code at the time (since resolved), and other issues, we did not move forward. But bottom line, not only could the redevelopment be very profitable, it could be developed in a manner that would protect the integrity of the Downtown National Historic District, and meet some of the wider community needs such as housing and parking.
So what about the $60 million dollar Gwendolyn? It would be a shame to lose the possibility. Across the street from the Gwendolyn site is an example of a project that redeveloped a major historic building, but at the same time demolished another and replaced it with a new “old” structure. In the case of the Tributary and Okta, the developers embraced local history, as opposed to the Gwendolyn team which attacked the local history as unimportant and took the tactic of downgrading it, including bringing in an expensive adversarial legal team. Next to the Okta is another redevelopment project that not only restored the existing building, but added another story stepped back from the street. These other projects embraced and complemented what makes our beloved 3rd street important to the wider community.
The Gwendolyn can redesign the project to contain what they envision, including the number of rooms and height, while also meeting investor needs. This may include maintaining the historic facades and/or purchasing the back portions of the property that were for sale, and by embracing our hometown “main street history”. The adversarial attorneys are doing more harm than good.
At the same time, the locals and the tourist promoters need to sit down and envision a more shared vision of our hometown. Increased density, including SROs (Single Room Occupancy), with a variety of housing, retail and office options would mix locals with tourists to create a vibrant inclusive downtown that we all can all enjoy. This needs to be combined with creative transportation options besides just cars to control and possibly reduce traffic, but that is another business we are working on for another time.
About the Authors: Brothers Drew Millegan and Quinn Millegan (27 and 24 years old respectively) manage the Woodworth Contrarian Stock & Bond Fund, a hedge fund based in McMinnville, Oregon. They grew up in the finance world, and specialize in contrarian investment strategies in the US Public and Private markets.
