An investment group has received the green light to redevelop former Centralia hotels into hybrids offering rooms for overnight stays and permanent residents.
Sage Investment Group’s initial request to amend Centralia’s zoning code was denied by the city council during its Oct. 10, 2023, meeting. The group returned last week during the council’s Tuesday, May 28, meeting, again requesting a zoning code be amended to allow for residential dwellings in Centralia’s Harrison Avenue highway commercial zoning district.
This time, Sage’s request was unanimously approved by the Centralia City Council.
Based out of Kirkland, Sage currently owns three former hotels within that zoning district, according to Centralia Community Development Director Emil Pierson. They include the former Motel 6 purchased in October 2022, the former OYO Hotel purchased in February 2023 and the King Oscar Motel purchased last January. The three properties have a combined total of 313 rooms.
Since their sales, Centralia has seen a reduction in lodging tax funds, which are delivered through a percentage of the cost of an overnight stay.
The former Motel 6 was purchased by Sage with the intent of converting it into “nice, affordable” studio apartments while the former OYO was initially purchased to convert into permanent supportive housing.
By the time the King Oscar was purchased, Sage’s intent was to turn all three into hybrid hotels with market-rate apartments for rent, according to Centralia City Councilor Max Vogt, who broke the news of the King Oscar’s purchase at the end of a January city council meeting.
On Tuesday, Pierson explained that without the passage of Washington state House Bill 1042 last year, he likely wouldn’t have recommended supporting Sage’s second zoning code amendment request. Pierson said city staff made their own changes to Sage’s request to ensure it not only aligned with House Bill 1042 but also with Centralia’s best interests as it continues to grow.
“Some of the major differences between the code that’s being proposed by Sage as well as us is they would like to see (multi-family dwellings) permitted outright. So if they came into the building department and said, ‘We’re going to convert this and we’re meeting your code requirements,’ it would be outright permitted,” Pierson said. “The city on the other hand said, ‘You know what, we’d like that to be a conditional-use.”
Sage’s amendment also only focused on hotels and motels in the district, while city staff recommended the amendment be applicable to all buildings within the C-2 zone.
“That bill said all pre-existing buildings,” Pierson added.
City staff also wrote language ensuring existing parking spaces be maintained and that the ground floor areas remain commercial use, with residential use being allowed on the second floor and higher. Of the 313 hotel and motel rooms in question at the OYO, Motel 6 and King Oscar, 147 of those rooms are on the ground floor and 166 are above.
Whitney Wilkins, who oversees community relations for Sage, also spoke at Tuesday’s meeting to explain Sage supported the city’s changes to their request.
“With these projects, it is what we consider the adaptive reuse model, to convert these hotels into multi-family housing,” Wilkins said. “Because of that, that’s how we’re able to really control that cost per unit. How hotels were set up as far as internet, cable, utilities, it’s how we can wrap it all in. With our current projects, we’re really excited about the prospect of working with the City of Centralia here and doing this kind of mixed-use model, where we do the residential on top and then the commercial on the bottom.”
This will allow for residential units to help address Centralia’s housing needs while still allowing the properties to contribute toward Centralia’s economy, Wilkins told the council.
“Especially with our partnership with the (Northwest) Sports Hub, we’re really excited to help them expand,” Wilkins said. She added there are currently “about 300 people” on a waiting list to get into residential units Sage intends to create.
Two other meeting attendees spoke out during public comment expressing interest in leasing a unit. With Sage and city staff in agreement about the proposed zoning code amendment allowing residential housing in C-2 commercial districts, the council unanimously approved the city’s version of Sage’s request.
To view Sage’s request, along with the changes Centralia city staff recommended that were approved by the council, go to page 72 of the council’s May 28 agenda at https://bit.ly/4aLRtrI.
