Galleria owner to tenants: Get out
Daily Journal of Commerce
by Kennedy Smith
05/14/2007
The eviction notice for almost every tenant on the second and third floors of the Galleria came April 30 from Judy Van Alstyne, a property manager at Bill Naito Co.
It started out friendly enough, talking about the building’s newest tenant, Brooks Brothers, a men’s clothier that had just signed a lease for 11,500 square feet on the ground floor along Morrison Street.
“This will mean good things for the building,” Van Alstyne wrote.
But in the next paragraph, Van Alstyne explained that securing the new tenant would mean a major overhaul to the heating and air conditioning system throughout the building.
Tenants, she continued, would have up to 60 days to find a new space.
“The 14 years we’ve been here we’ve heard rumbles off and on all the time that something might happen that would lead us to wind up getting bounced,” Tim Hibbitts, principal at opinion research firm Davis, Hibbitts & Midghall, said. “This time it happened to be true.”
Hibbitts’ firm, a three-person operation, rents about 700 square feet on the Galleria’s second floor on a month-to-month basis. The building’s biggest tenant since 2002 has been the Western Culinary Institute, which occupies 65,000 square feet on the fourth and fifth floors. But the Galleria’s also home to a travel agency, a student foreign-exchange program, Oregon Children’s Theatre, Portland Jazz Festival, Kaplan Test Prep and Admissions and a smattering of other small businesses.
Every business on the second and third floors, save Kaplan and the children’s theater, will be gone by the end of June.
‘Every single right’ to evict
Hibbitts said he wasn’t surprised by the letter. But he said he was a little unnerved that the letter came so abruptly. “It seems to me they’re not very interested in having a conversation with us,” he said. “Judy Van Alstyne, who signed the letter, came in, handed it to me, and turned around and left.”
But Hibbitts said he doesn’t hold a grudge.
“It’s a business arrangement,” he said. “They have every single right to do what they want to do with their building. I wouldn’t say we’re angry at all. I would say we wish we didn’t have to be doing this.”
Alix Nathan, executive director of Education Travel & Culture, which has been a second-floor tenant at the Galleria for about eight years, said building owner Bill Naito Co. has been “nothing but professional” throughout the ordeal.
“It’s challenging to move, but we’re leaving on good terms,” he said. “I think their strategy is correct. They’re utilizing vacant retail, and it’s a positive impact for the neighborhood and the West End.”
Not everyone is ready to sing Bill Naito Co.’s praises, however.
“They’re probably the worst landlords in the city,” Don Delplanche, owner of Travel & Cruise Professionals, which rents about 400 square feet on the second floor, said. “The best thing for the building would be for a new owner to come in here and to completely redo the building. The Naitos don’t know how to run this building at all.”
Delplanche said he’s had trouble with his landlords for all of the 20 years he’s been a tenant. But he stayed, he said, because the rent was cheap.
The Bill Naito Co. has offered to relocate each displaced tenant to any of its eight buildings in Old Town/Chinatown, Anne Naito-Campbell, said. Any tenant that takes the offer will have to pay market rate, she said. No tenant has yet taken her up on it.
From bustling
to nearly dead
The fate of the Galleria, located at 921 S.W. Morrison St., has been a mystery since before Bill Naito Co. acquired it in 2005 through a deal with the other side of the Natio family, Sam and Verne Naito.
For years, people have wondered what would happen to the once-thriving indoor mall. The Galleria has been in the Naito family since the 1970s, yet the family hasn’t done much to improve it since its grand opening in 1976. Its lone marquee retail tenant is a Naito-owned Made in Oregon store. Most of the activity surrounding the building now comes from culinary students mulling around outside on their smoke breaks.
But with Brooks Brothers moving in, the company had to make improvements to the building, Naito-Campbell said. Those improvements, on which Bill Naito Co. “procrastinated” for years, she said, necessitated the evictions.
“They were given years of well-below market rents on the second and third floor,” she said. “But construction on Brooks Brothers and the way the space is open, the noise, the dust, and everything else signaled it was time.”
The company is still unsure what will happen to the second and third floors, she said, but she said she hopes to bring it “back to its splendor of when it opened on Oct. 1, 1976, with 100 percent occupancy.”
Although the renovations are a disappointment to the displaced firms, they’re nevertheless a “big acknowledgement of what (Bill Naito Co.) thinks can happen to this part of Portland,” Adam Davis, Hibbitts’ partner, said.
“It’s a good step forward for retail in downtown Portland and a good step for the owner of this building,” Davis said. “What’s amazing to me is that it’s taken this long for something like this to happen here.”
The Galleria renovation is a cornerstone project for revitalizing the Park Avenue District, Gil Kelley, head of the Portland Bureau of Planning, said.
And developer Tom Moyer earlier this year announced plans to build a mixed-use high-rise on Block 4, adjacent to the under-construction park on Block 5 and the city’s Smart Park garage.
The district may see changes in parking as well. The city had issued a request for proposals to redesign the garage on 10th Avenue and Morrison Street, but it rescinded that RFP when responses didn’t meet its criteria. In late March, the city said it was still deciding whether to reissue an RFP.
Kelley said the Planning Commission will most likely compile a status report on the Park Avenue Vision Project for the Portland Development Commission this summer.
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