By Jim Redden
A major private residential redevelopment project in North Portland is on hold because of the city’s gloomy national reputation.
The owners of the vintage Palms Motel at 3801 N Interstate Ave. have been planning to replace it with a seven-story apartment building with 155 units. It would include some units affordable for households making no more than 60% average median income under Portland’s inclusionary zoning policy.
But motel manager Dirgesh Patel, whose family has owned the property as Green Lotus Investments since 1998, says a major investor backed out because of the city’s sluggish economy and the area’s high crime rate, which has reduced the property’s appraised value.
“There are just so many things affecting the ability to raise capital,” Patel told the North Peninsula Review.
The project has been planned for three years. Longtime North Portland neighborhood leader, Jerry Lindsay, says it would have been beneficial, especially because the location is on a MAX light rail line.
“Increased density should lead to more retail amenities that are perhaps in walking distance. Good density usually makes neighborhood public spaces feel more alive and that makes people feel safer and more inclined to use the public spaces,” says Lindsay, a former Overlook Neighborhood Association board member.
The problem was first reported by the Portland Business Journal on April 10. Green Lotus Investments had previously obtained both a demolition permit and a construction permit from Portland Permitting & Development for the project. But it has now stalled.
“[Lenders] tell me until they see a real commitment from the city to say what they’re ready to do, they’re not going to put a substantial amount of money here,” the Portland Business Journal quoted Patel as saying.
The Palms Motel opened in 1954 as an affordable motor lodge when Interstate Avenue was a major transportation link between Washington and California. A classic example of clean mid-century design, the motel is perhaps best known for its original 50-foot-tall neon sign with four colors featuring a blue monkey climbing up twin palm trees, evoking images of a tropical paradise.
The Building on History blog has reported that “Although the over-sized Palms sign would not be allowed under Portland’s current sign code, there is an exception for a few notable neon signs along Interstate Avenue. The city’s current historic resources code could allow the sign to become a designated landmark, independent of the rest of the property.
Photo by North Peninsula Review.
After the beginning of the Covid-19 pandemic in early 2020, Multnomah County contracted with nonprofit agencies to provide housing for at-risk and underserved community members at the Palms Motel. That program ended last year.
The planned replacement apartment building was designed by architecture firm Ankrom Moisan and would have been built by Bremik Construction. The neon sign would have been restored.
Patel said his family has not decided what to do next. Seeking public financing is out of the question, Patel says, because it includes requirements, like paying state-set prevailing wages equivalent to union pay scales, that would increase construction costs 20% to 30%.
“What the market needs is government financing that does not increase costs,” Patel told the North Peninsula Review.
The story broke shortly before Gov. Tina Kotek released data showing Oregon housing production is still far below the 36,000 new units a year that she says it needs. The number of housing permits issued in 2026 is on track to increase 11.3%. But that will only amount to 15,412 permits by the end of the year, less than half of what Kotek says the state needs.
Even new publicly financed affordable housing projects in the metropolitan area are not unlikely to increase soon. The City of Portland and Metro, the elected regional government, have already committed all of the affordable housing bond funds previously approved by voters.
During a July 21 presentation to the City Council’s Housing and Permitting Committee, new Metro Council President Juan Carlos Gonzalez said recent polling shows there is not currently enough voter support to guarantee passage of any new ballot measures.