Developers detail $30 million vision for Mercantile property

By Martin Kidston/MISSOULA CURRENT

During his youth in the 1960s, John Engen frequented the Missoula Mercantile with his father, picking out hardware to repair the kitchen sink. He made trips to the candy store, sat with Santa Clause and shopped for furnishings after his marriage.

Now serving as Missoula's mayor, Engen joined a team of real estate developers on the sixth floor of a downtown bank on Friday to say that his memories of the Mercantile, while fond, aren't tied to the building but rather, to the people who made it special.

“I appreciate the emotion that comes with an old building coming down, but the building is not the icon for me,” Engen said. “That corner, however, is iconic, along with the people who conducted their business there.”

Andy Holloran and his development team from HomeBase joined Engen and other community leaders at Friday's press conference to share their vision for the Mercantile, one that would see the building deconstructed and replaced with a customized $30 million Marriott hotel.

Holloran unveiled the plans before the Historic Preservation Commission the night before. The meeting was packed and the plans didn't sit well with members of the commission and many of those in attendance.

“There's a tremendous amount of passion in this community, and a tremendous amount of passion for the Mercantile,” Holloran said on Friday when asked about the reaction the night before. “We respect, appreciate and honor the history of this building.”

The building's history dates back roughly 144 years and represents the city's hardscrabble past and its history as a center of commerce in what's otherwise a sparsely populated region. For decades, it has brought people together, anchoring the city's downtown district.

But for the past six years, the building has sat empty, falling deeper into a state of disrepair. Over the past three years, nearly two-dozen prospective buyers have looked at the property, hoping to refurbish it in its current state.

One such promise came close last year when Stephen Glenn and Dario Passalalpi of Reno, Nevada, announced their intention to refurbish the property. After months of due diligence, however, they walked away after learning that costly asbestos work was needed to move forward.

“Many companies have looked at repurposing the building in its current state, as have we,” Holloran said. “We've come to the similar conclusion that the physical structure is past its life. It's no longer occupiable.”

Over the past few months, Holloran said, HomeBase has explored a number of options. Developers looked at renovating the existing building, but realized it wasn't possible based on engineering reports. Holloran said the findings also excluded a partial renovation.

“Each and every step of the way we were met with economic and financial challenges,” Holloran said. “Economics and costs matter. When we and our engineers looked at this building, structurally, it's not up to code. The facade itself is crumbling. So today we're looking at a deconstruction of the building.”

While HomeBase has not closed the deal, it is formulating plans for redevelopment. Images presented Thursday and Friday showcase a five-story branded hotel with 154 rooms and 24,000 square feet of ground-floor retail and restaurant space.

In accordance with the city's 2009 Downtown Master Plan, the retail space would front both Higgins Avenue and Front Street. The hotel's lobby would face Pattee Street. Supporters believe the project would revitalize the downtown area and help establish a new east-west retail corridor.

“It's a product type that doesn't exist downtown,” said Holloran. “We think bringing 300, 400 or 500 guests a night into that location – filtering through downtown, eating, drinking, shopping and visiting the Wilma and other locations – is going to be really exciting.”

The project is being developed by JNS Design based in Denver. The firm designed the Dairy Block Hotel in the city's LoDo district and helped complete a $54 million transformation of Denver's Union Station, among other projects.

The firm has carved a niche designing custom hotels and has won Marriott's “best custom hotels” award for each of the past two years. Like many projects, the firm incorporates a story into its design. For the Mercantile, that includes “the merchant's spirit” and a unique community “mews.”

“The mews can become this internal street that reflects the spirit of the merchant,” said Nicole Nathan, principal with JNS Architects. “It would be a very active space – a very public space. We'd like to invite the local community to be a part of the success of this project.”

Nathan and Holloran would work with Home Resource of Missoula during the deconstruction process to salvage and repurpose the building's historic features. Many of the items would be included in the mews and other architectural features.

Holloran said deconstructing the building would take three months to complete. The process would add significant costs to the project, but Holloran said it's a cost HomeBase was willing to pay out of respect for the building's history.

“A big criteria for us was the ability to customize this,” said Holloran. “That was very important to us. The Marriott Corp. has allowed us and supported us with a complete custom hotel. This is going to be Missoula's living room.”

Three blocks to the west on Front Street, the city is working with a separate team of developers who are looking to launch a $150 million revitalization of the Riverfront Triangle. That project also includes a 200 room branded hotel and a conference center.

Holloran said HomeBase wasn't deterred by the Riverfront project. Rather, he said, the flurry of activity has placed Missoula on the map and gained the attention of developers.

“We've done a tremendous amount of market research,” Holloran said. “When we look at the Missoula community, it's almost two sub-markets. We have Reserve Street and downtown. Travelers prefer an urban, walkable location. We couldn't think of a better location than Higgins and Front.”

Engen agreed, saying the city's hospitality industry is growing and the interest in downtown Missoula is hot. Aside from the two hotels, a  five-story student housing project is expected to break ground on Front Street this spring. A six-story Stockman Bank building is under construction on West Broadway.

“One of the things we're working on through the conference center and the complimentary project that's happening on the Riverfront Triangle is creating what industry-types call compression,” Engen said. “We create new opportunities for those rooms to get used, and for people to visit Missoula and participate in the community.”

Estimates suggest the new Marriott project would bring 200 jobs to the community with an average annual payroll of $6 million, along with $8 million in direct tax benefits.

The Historic Preservation Commission will consider the request for a demolition permit on April 7 – a vote Engen described as advisory. The City Council will also have an opportunity to consider the request.

If the permit is issued, Holloran said, the project would begin this year with the hotel opening in late 2017 or early 2018.

“Market conditions open and close,” Holloran said. “We believe now is a great time to be doing this project in this community. We also understand there's a process we need to go through. We look forward to that process occurring.”