A complex deal to purchase the Red Lion Hotel across from the new Lithia Motors headquarters could involve the city paying about half the cost of the almost 8-acre property.

A complex deal to purchase the Red Lion Hotel across from the new Lithia Motors headquarters could involve the city paying about half the cost of the almost 8-acre property.

DHD LLC, a company created by an unnamed group of investors, wants to buy the Red Lion for an undisclosed amount. The property is listed for $3.5 million.

DHD wants to sell off the southern 3.29 acres of the property to the city for $1.6 million, though the land in question doesn't contain the most valuable portion of the Red Lion property to the north.

Public information about the purchasing company is almost nonexistent, although the City Council had held a closed executive session to discuss the potential deal.

According to the Oregon Secretary of State's Office, DHD LLC is based out of Portland and the registered agent is listed as LPSL Corporate Services Inc., which operates out of Seattle and is connected to the law firm of Lane Powell.

Mark DeBoer, vice president of real estate for Lithia Motors, declined to discuss the proposed purchase, although he suggested that he may be involved in the deal. He said he couldn't share much information about the property negotiations, which he described as "complex" and "delicate."

"When it's time, it will all be public information," DeBoer said.

Councilor Chris Corcoran, assistant chairman of the Medford Urban Renewal Agency, said he wants to ensure the city is getting value for its dollar before agreeing to a property purchase. He said the city shouldn't take on half the cost of the property if it's not getting half the value.

"If it was a 50/50 (cost) split, I wouldn't want to go for something like that," he said.

Corcoran said the question of paying fair market value will be discussed during the City Council meeting at noon Thursday, June 6, in City Hall, 411 W. Eighth St. Corcoran said he doesn't know how much DHD has agreed to pay for the entire Red Lion property.

If the city approves the deal, it would end up with the three buildings at the southern end of the property that have 68 of the hotel's 185 rooms. Eventually, the city would demolish those buildings and create a parking lot, a walking area along Bear Creek and possibly a pedestrian bridge to connect to Hawthorne Park, which also is on track for major renovation.

DHD would keep the conference center, restaurant and a majority of the rooms. DHD also would retain the property with the most street frontage including along Riverside and a smaller portion on Fourth Street.

According to the Jackson County Assessor's Office, the estimated real market value of the 3.29 acres that the city would acquire is a little more than $1 million.

The three tax lots that DHD would retain have a combined value of about $2 million.

The total value of all five tax lots for the Red Lion property adds up to about $3 million, according to the Assessor's Office.

Bill Hoke, assistant city manager, said he analyzed the price of the property based on comparable values in the area, which he said are $10 to $15 a square foot.

Based on the total square footage of the property the city is considering, the cost per square foot would be just over $11.

"I think it's a fair price," Hoke said.

Hoke said he didn't know the amount DHD has offered to pay for the entire Red Lion property, and said he wasn't sure what DHD wants to do with the property.

If the City Council approves the deal, Hoke said, the city does have money that could be earmarked for building demolition and expanding the parking area.

Based on the size of the lot and riparian setbacks, the property could handle up to 200 parking spaces, Hoke estimated.

By comparison, the 1.33-acre Dollar GMC lot about a half-mile to the south on Riverside Avenue will accommodate about 100 parking slots. The Medford Urban Renewal Agency Board recently agreed to purchase the Dollar lot for $525,000

Hoke said the existing parking areas around the Red Lion are in good shape. The property already contains more than 100 parking spaces around the buildings.

City officials have been looking for other possible parking lots to accommodate growth around The Commons over the next five years. A consultant's report issued last year said the area in the vicinity of The Commons could be as much as 1,000 parking spots short of what's needed once the downtown revitalization project is complete.

Council members also have been looking at ways to better connect The Commons development with Hawthorne Park and Bear Creek to help improve the downtown.

The proposed purchase of the Red Lion property by the city is not part of MURA's revitalization plan. So the money for the property initially would come from the city's contingency account.

The MURA board then would consider altering its revitalization plan so that MURA can purchase the property from the city.

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