Mark and Sid DeBoer of Lithia Motors are among the partners involved in the possible purchase of the Red Lion Hotel, according to a sale agreement obtained from the city of Medford.
The city could agree today to purchase a portion of the Red Lion property from the DeBoers, who are listed as members of DHD LLC, based in Ashland.
At a noon meeting, the City Council will discuss the agreement.
The 10-page sale agreement provides additional details about the city's $1.6 million purchase of 3.29 acres of the Red Lion property for use as a parking lot. The entire property of almost 8 acres is listed for $3.5 million.
The DeBoers would retain ownership of the hotel's convention center and restaurant and a majority of the hotel 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.
As part of the agreement, the DeBoers' company would receive a perpetual easement on the city parking lot for overflow parking at the convention center. Details about how many parking spaces would be made available to the Red Lion haven't been finalized. The overflow parking on the city lot would be provided at no cost to the DeBoers, according to the agreement.
If the city approves the agreement, it would receive three buildings on its portion of the property. The three buildings have a total of 68 hotel rooms. In addition to the $1.6 million, the city anticipates spending $100,000 in closing costs. The money is coming out of a $2 million set-aside in the Medford Urban Renewal Agency budget.
Under the agreement, the city would not be able to operate the buildings as a hotel unless it was part of the operation of the Red Lion.
The agreement proposes the city provide an easement over its property to allow greater access to the hotel.
The DeBoers' company would retain all personal property in the three buildings, such as bedding and other equipment not attached to the buildings.
Councilor Daniel Bunn said he supports purchasing a portion of the Red Lion Inn property but predicts the council will question how much the city would pay for the 3.29 acres. Based on the list price of the Red Lion property, the city would be paying roughly half.
"With respect to buying it, I'm for it, conceptually," Bunn said. "Are we getting the right value for what we're paying?"
The city would be paying $11 per square foot for the land, which is in line with other properties that have sold in the downtown for anywhere from $10 to $15 a square foot.
Bunn said the suggested deed restriction that would provide a perpetual easement over the city parking lot for convention center events doesn't sit well with him.
"It makes the title less marketable in the event that we might want to sell it," Bunn said. "When we're paying a little over $11 a foot, we should get clear title."
He said the city also needs to protect the value of its property in case the hotel and conference center is resold in the future.
Bunn said he doesn't know what the DeBoers plan to do with the hotel after they purchase it, though the agreement does show they intend to continue using the conference center.
The city will acquire three buildings with 68 hotel rooms as part of the deal. Bunn said he believes the city would like to demolish the buildings as soon as possible rather than consider some kind of lease-back arrangement with the new owners of the Red Lion.
"We don't want any more vacant buildings in the downtown," he said.
Councilor Dick Gordon said he wasn't very concerned about the city potentially investing half the dollars toward the purchase of the Red Lion property.
"The job of urban renewal is to assist with redevelopment," he said.
Gordon pointed to the One West Main corporate offices, which are being built around the Evergreen parking garage by Pacific Retirement Services, Rogue Disposal and Procare.
The city is contributing $2 million as an incentive toward the 115,000-square-foot project that is expected to start this summer.
"We've put $2 million on West Main Street because we're trying to make things happen," Gordon said.
He said the one item that gave him the most concern is the perpetual easement issue.
The DeBoers could not be reached for comment Thursday.
Reach reporter Damian Mann at 541-776-4476, or email firstname.lastname@example.org.