$1.6 million question hangs over Red Lion

Adeal struck by Lithia Motors executives to buy the Red Lion Hotel has edged closer to finality, with the city still in the dark about whether it is paying half the purchase price or more.

"I was really disappointed that Lithia wouldn't disclose the terms to us," Councilor Dan Bunn said.

The city has agreed to pay $1.6 million for a less-valuable, 3.29-acre portion of the almost 8-acre Red Lion property on Riverside Avenue from a company formed by Mark and Sid DeBoer known as DHD LLC. The Red Lion is listed for $3.5 million, but the DeBoers wouldn't disclose how much they're actually paying.

"I'm concerned that if the purchase price comes in lower than we think, the city will be embarrassed," Bunn said.

City Manager Eric Swanson told Bunn during a Thursday council meeting that the DeBoers did not want to disclose the purchase amount.

The DeBoers would retain ownership of the hotel's convention center and restaurant and a majority of the rooms. Mark DeBoer is vice president of real estate for Lithia Motors, which in 2012 opened its headquarters directly across Riverside Avenue from the Red Lion.

Sid DeBoer is chairman of the board for Lithia.

The council approved a five-year agreement to give the hotel free use of half the 200 parking spaces on the city parking lot for up to five special events during a given month. Under the agreement, a vehicle that was displaying a hotel placard would not be subject to any time limits in the parking lot. The availability of spaces would be on a first-come, first-served basis.

The council also voted for a deed restriction that would prevent the city from building a hotel on its parking lot for at least 20 years, with automatic renewals for two additional 20-year periods unless the city decides to opt out.

Bunn said he would feel more comfortable paying the $1.6 million, plus $100,000 for closing costs, if the deed restrictions were removed because they could affect the marketability of the property if the city decides to sell in the future.

Bunn and Councilor Karen Blair were the only councilors who voiced any objections to the deal, which had been discussed at a previous council meeting.

Blair said she wondered why the city isn't getting an appraisal for the property, particularly because part of the lot is located in a riparian setback that would diminish the value.

City officials have said the approximately $11-per-square-foot price is in line with other recent sales in the downtown.

However, the city paid Lithia $989,456 for three lots totaling almost a half-acre on Feb. 7, 2012, which works out to $50 a square foot. The three lots are located in the second park that is under construction in The Commons, where the new Lithia headquarters is located.

Scott Henselman, broker/owner of Henselman Realty & Management, who has served as chairman of the ad-hoc committee that formed the Medford Urban Renewal Agency, said the city should approach this land deal with more caution, but he said it's difficult because the Medford Urban Renewal Agency and Lithia have worked so closely together.

"They're in bed together," he said. "You cannot have arm's-length transactions in these kinds of situations."

Henselman said he wouldn't support a deed restriction and allow the hotel access to 100 free parking spaces for events.

"That restriction, in my opinion, is unacceptable," he said.

Henselman said he would insist on an appraisal, an environmental assessment and a determination of how much land would be lost to a riparian setback. The environmental assessment has been a concern because a number of underground tanks have been discovered on the Red Lion property.

Henselman said $11 a square foot for the parking lot appears to be a reasonable price as long as there aren't the deed restrictions and environmental problems.

He said there are radically different prices for properties in the downtown, and he said he would insist that the DeBoers disclose how much they're paying for the property.

"For them not to disclose, it's worrisome," he said.

Reach reporter Damian Mann at 541-776-4476 or dmann@mailtribune.com.

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