$160K unpaid taxes, vandalism plague developer whose micro-apartments eased rental woes

Three years after Fortify Holdings began buying Tri-Cities motels and converting their rooms into micro-apartments, its legacy is mixed.

The Portland, Ore.-based Fortify spent $38.1 million to buy six local motels and nearly $13 million more to convert five of them into tiny apartments.

Through its efforts, Fortify added more than 800 new rental units to the Tri-Cities’ notoriously tight housing market.

But it has also fallen behind on its property taxes and the city of Kennewick has publicly suggested it might demolish one Fortify property after it became a public nuisance.

Fortify’s buying spree began in July 2021, when its closed its first deal for the sprawling Best Western Plus hotel in Richland. It ended eight months later in March 2022, when when it closed on the purchase of the former Motel 6 in Kennewick.

One year after that, it began leasing units in 2023.

The result is a measurable loosening of the rental housing market — good news for renters.

But its record also includes $160,000 in unpaid property taxes and the appearance it abandoned a Motel 6, where it intended to provide homes for seasonal agricultural workers but which has fallen into disrepair and is boarded up.

Public property tax records reveal Fortify has an inconsistent record of paying property taxes in Eastern Washington, where the Tri-Cities isn’t the only place where it executed its hotel conversion strategy.

A crew of workers install wood panels over the doors, windows and air conditioning unit openings of the former Motel 6 near Highway 395 in Kennewick. City officials say they hired a contractor to secure the vacant property after the property owner failed to.

Proud of its record

Ziad Elsahili, president of Fortify, defended the company’s record in a written response to Tri-City Herald questions about its unpaid tax bills and its plans for the former Motel 6, which it calls The Kenn.

Elsahili emphasized the 840 new units Fortify added to the Tri-Cities and said the company will pay its taxes and plans to restore The Kenn.

“We are proud of our projects and the impact they have had on the Tri-Cities housing market by providing an additional 840+ units to address the massive housing shortfall. We are aware of the property tax arrears and fully intend to bring all accounts current. Our goal is to continue being a contributing member of the Tri-Cities community going forward,” he wrote.

“Regarding the Kenn, we are deeply disheartened by the millions of dollars in damage due to vandalism of the property. We are currently working directly with the city and our insurance provider to address necessary repairs and have the property re-opened as soon as possible,” the statement said.

The Kenn, formerly the Kennewick Motel 6, sites vacant and boarded up yeas after Fortify Holdings of Portland bought it as part of a buying spree that netted six local properties. Five were converted to micro-apartments but The Kenn was supposed to provide seasonal housing for agricultural workers.

Buying spree

Fortify, sometimes operating through other subsidiaries connected to the The Metropolitan Group in Beaverton and Portland, owns two properties each in Kennewick, Pasco and Richland.

It wanted two others — the Clover Island Inn in Kennewick and the Riverfront Richland Hotel, but backed off when it wasn’t able to purchase the land they sit on from the Port of Kennewick and city of Richland, respectively.

Over the next year, building permits show, it invested nearly $13 million to convert five of the six properties into micro-apartments.

A staged display apartment unit at The Alegre apartment complex at 1520 N. Oregon Ave. in Pasco. The facility, formerly a motel, has been renovated into a micro-apartment complex featuring studio 200-square-foot studio apartment with convection oven/microwaves, air conditioners and hardwood floors.

A former Rodeway Inn in Pasco, renamed The Alegre, was first to open.

Richland’s old Best Western Plus reopened as The Franklin. With 204 rooms, The Franklin is the largest of the five micro-apartment properties in the Tri-Cities.

The flood of new apartments helped balance the tight rental market.

In 2020, the vacancy rate had sunk to 3.7%. Double-digit rent increases were a common complaint as area renters coped with a 40% jump over the course of the pandemic.

In 2021 alone, local rents climbed an astonishing 12%, according to a recent study by CoStar and published by The Management Group Northwest.

In April, a year after Fortify properties began opening, the vacancy rate had climbed to 7.7% and rent increases had dropped to 1.5%.

The CoStar report credits the hotel conversions and new construction in the market for the cooling in the market.

The average local rent was $1,350 per month last month, about $300 less than the national benchmark figure.

Fortify Holdings co-regional managers Rob Jacobs, left, and his brother, Daniel, stand in 2023 in a finished model micro apartment inside The Franklin complex in Richland. The company was transforming the former Best Western Plus on George Washington Way into about 200 apartments.

Nuisance property

The Kenn, formerly the Motel 6, is the outlier in the Fortify portfolio. Its five peers cater to renters willing to pay $900 or more for tiny studio apartments.

The company initially intended to convert it to micro-apartments. Midway, however, it withdrew its building permit application and indicated it would go in a different direction: Seasonal housing for farm workers.

Bunk beds were added and residents on site in 2023.

Last fall, however, it fell empty and began attracting the wrong kind of attention.

The city of Kennewick ordered Fortify to secure the building.

When it missed the deadline in December, the city hired a contractor, Columbia Construction Services, to board it up, and, later, to remove graffiti scrawled by someone outraged by the use of public funds.

The $16,250 cost is being passed along to Fortify via a lien against the property.

Kennewick even confirmed it was considering demolishing the motel as the cost of dealing will illegal trespassing and the issues that spawns.

Dana Dollarhyde, Kennewick spokeswoman, said there has been no further interaction with Fortify.

The city continues to monitor the old motel to ensure it remains trouble free. In mid-May, it was vacant with weeds sprouting from the parking lot and a portable toilet abandoned near the lobby entrance.

Motel 6 signs have been stripped from the property, save for one directional sign in front of its neighbor, Dairy Queen.

Dollarhyde said city is waiting for Fortify to submit plans to complete the permitting process to undertake repairs.

The Rodeway Inn at 1520 N. Oregon Ave. in Pasco was turned into micro-apartments by Fortify Holdings of Oregon.

Property taxes unpaid

Fortify missed payment deadlines in 2023 and 2024 on some, though not all, of its properties in Benton and Franklin counties.

Property owners can pay the annual tax bill in two parts, with half due by April 30 and the balance by October.

The Days Inn is cleared to become micro units after the Richland City Council in June eliminated a requirement for apartments in downtown to be a minimum of 500 square feet. Fortify Holdings, that is buying multiple properties in Tri-Cities, is the developer.

Ken Spencer, Benton County treasurer, confirmed that state law gives property owners three years to catch up on their unpaid balances before foreclosure proceedings can begin.

State law also ensures property owners have little incentive to use the window as a free loan: It charges 9% interest on unpaid balances, two points more than the current average for a 30-year residential mortgage.

• The Kennewick, formerly Motel 6, 2811 W. Second Ave.: Fortify paid its 2023 property tax in full, but missed the April 30 deadline to pay the first half of its total 2024 bill of about $41,600. The past due balance is $21,000.

• The Q, formerly Quality Inn, 7901 W. Quinault, Kennewick. Fortify paid its 2023 property tax bill in full. It missed the April 30 deadline to pay the first half of its total 2024 bill of about $70,400. The past due balance is $35,500.

• The Franklin, formerly Best Western, 1515 George Washington Way, Richland. Fortify owes $37,100 on its 2023 tax bill. It missed the April 30 deadline to pay the first half of its total 2024 tax bill of about $82,400. The past due balance is $42,100.

• The Meriwether, formerly Days Inn, 615 Jadwin Ave., Richland. Fortify paid the 2023 and 2024 property tax bills in full and has no outstanding balance.

• The Alegre, formerly The Rodeway Inn, 1520 N. Oregon, Pasco. Fotify paid the 2023 tax bill in full. It missed the April 30 deadline to pay the first half of its 2024 tax bill of about $46,000. The past due balance is about $24,000.

• The Clark, formerly the Loyalty Inn, 1801 W. Lewis, Pasco, consists of three parcels. Fortify made a partial payment for its combined 2023 bill and missed the April 30 deadline for the 2024 property taxes bill of about $44,700. The unpaid balance for the three parcels is $39,400.

Fortify also missed property tax deadlines in other Eastern Washington communities where it purchased old motels for its micro-apartment conversion business.

• In Ellensburg, where it converted a 76-room former Motel 6 into The Agate, it made no property tax payments in 2023 and missed the April 30 deadline for the first half of the 2024 property tax bill.

• In Spokane, it missed 2023 and 2024 deadlines to pay property taxes for a former Days Inn it purchased and rebranded as The Imperial. The Spokane County treasurer tallies its unpaid tax bill at nearly $70,000.

Sign Up: Boom Town Tri-Cities

Stay up to date on Tri-Cities growth and development with our weekly business newsletter. Get the latest on restaurant and business openings and closings, plus the region’s top housing and employment news. Click here to sign up. In your inbox every Wednesday.