Downtown Lake Oswego hotel and housing development delayed until 2026

The long-awaited — and repeatedly stalled — North Anchor project faces yet another prolonged delay.

The city of Lake Oswego agreed to a two-year extension on the project — which is a collaboration with Urban Development + Partners — to build a hotel and mixed-use development that will include housing at the corner of State Street and B Avenue. In turn, the city is also contemplating how to lessen potential risk associated with the dilapidated buildings currently at the site.

The Lake Oswego Redevelopment Agency, which is made up of city councilors, approved the delay during a meeting Tuesday, June 18. It also mulled the possibility of coming to an agreement with UDP to demolish the buildings in the interim as a way to lessen one risk associated with the city continuing to own the property rather than initiating the ownership transfer. The transfer was supposed to take place this month but will now occur in 2026, according to the new agreement. The City Council agreed at the meeting to delay the enactment of a disposition and development agreement (a contract that lays out both parties’ obligations) until September as staff negotiates a potential demolition at the site.

Despite continued difficulties, developer says progress has been made

The city has agreed to three previous extensions to this iteration of the project — which UDP said has proven more challenging than anticipated due to economic factors like interest rates, inflation and struggles to obtain financing — and now will wait two more years for the project to come to fruition. UDP requested the two-year extension in a letter sent on June 6.

“As you know, economic conditions continue to be extremely difficult for real estate development and few projects are getting financed. Despite these trying circumstances, we have made great progress since our last LORA meeting,” the UDP letter reads.

UDP added that it recently received letters of intent from an investor for the hotel portion and from another lender for the apartments. Further, it has garnered interest from an investor for the acquisition of land and invested $4 million in the project so far.

“Acquiring the land and having more time to start construction will provide security needed to raise the remaining equity,” the letter reads.

The property transfer was supposed to close June 28 this year and UDP is requesting that date be pushed back to June 30, 2026. and for Construction would then begin July 8, 2026.

The site was the centerpiece of the city’s East End Redevelopment Plan in 2004 and the city first went out for a request for proposal for this project in 2015 before its previous partner, Vanessa Sturgeon of Sturgeon Development Partners, backed out in 2019. The local government has since been working with UDP.

In recent years, leading up to Tuesday’s meeting, the city has tried to make the project more feasible amid challenges, including establishing a tax incentive program that will provide a 20% tax reduction for each housing floor above the bottom retail floor for 10 years. The city also previously agreed to sell the property for $5 million and contribute about $2 million toward the project.

“I think we all remain extremely excited about this project and are willing to commit in the long term to see this through,” Mayor Joe Buck said at the meeting.

The demolition question

Buck also said the city plans to look into and negotiate for UDP to demolish the current buildings at the site as the city is concerned about repairs that are needed in the interim period.

“It’s just the inherent risk with older, vacated buildings. There’s no imminent concern but with a horizon to additional time before construction, it’s something we want to continue keeping an eye on as the property owner,” Buck said when asked about the state of the buildings after the meeting.

There also could be the aesthetic benefit of not having abandoned buildings continue to sit downtown and more immediate demolition would amount to visible progress, Councilor Ali Afghan said at the meeting.

“I was very vocal about, if there is going to be a substantial extension or another extension, we need to see some visible progress toward the end goal. The late breaking news is that, when we approached UDP, there seems to be a mutual interest in figuring out how to go forward where we have visible progress at the site,” Afghan said.

However, City Manager Martha Bennett said she had some concerns about this idea and that the city staff will need to look into it further. A UDP representative also said there could be complications.

Based on the conversation behind the dias at the meeting, it seemed some councilors were more looped into the idea of negotiating the demolition issue. Councilor Aaron Rapf in particular expressed frustration about not having heard about the idea and thought the council was only voting on the 24-month extension.

“I have a problem with the way we communicate with each other,” he said, adding that imposing further conditions on UDP could risk making the project less viable.

Still, the resolution passed 7-0. And Buck and others made clear that the demolition negotiation idea was put forth soon before the council meeting.

Following the vote, UDP introduced Bob and Will Naito from Naito Development Company, which became a project partner for the hotel portion of North Anchor. The company has been involved in considerable real estate development in Oregon for decades and will focus on the hospitality side of this project.