PORTLAND, OR-Sage Hospitality Resources of Colorado this month closed on its acquisition of the top 10 floors of the 15-story, 600,000-sf Meier & Frank Building, kick-starting its nine-figure transformation of the Downtown space into a 330-room Luxury Collection hotel, a Starwood brand. The lower floors of the historic building house a department store that the seller, May Co., is busy renovating into a Macy’s.

The hotel is scheduled to open in summer 2008. Sage Hospitality EVP Ken Geist tells GlobeSt.com the cost to acquire floors six through 16 was $20.5 million. In the past year, the project’s total development cost has risen from $108 million to $118 million, he says, due to a combination of factors. “Construction costs, expanded scope, schedule changes, more interest expense, and a lot more legal expanse related to the New Markets Tax Credit,” Geist says.

The project won $72.5 million of New Markets Tax Credits–the largest single allocation of federal New Markets Tax Credits in the country–which netted Sage about $23 million in cash. The city’s Portland Development Commission also is assisting in the project, providing $14 million through its seismic loan program.

Starwood’s high-end brand, the Luxury Collection is new to the market and will compete for room nights with the likes of the Westin, another Starwood brand, and the Heathman. There are currently eight Luxury Collection hotels in the US.

The hotel will feature a lobby with glass covered atrium, restaurant and lounge on the eighth floor; a ballroom and meeting facilities on the sixth and seventh floors, and 334 hotels rooms on the top seven floors. A new elevator lobby on Morrison Street will provide guests dedicated access up to the main hotel lobby. Sage also is looking at the feasibility of adding a roof-top restaurant and lounge that would include an outdoor patio.

Light demolition and clean-out is under way. Construction staging areas will be set up on Fifth and Sixth avenues and also on Alder Street. The department store will remain open throughout its own $30-million renovation and Sage’s hotel conversion. Sage estimates the hotel will generate 170 new permanent jobs and will create 400 construction jobs over a two-year period.

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