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Washington High School‘s 500-seat auditorium is an immense room.

“This has been the biggest conundrum we’ve had because it’s the center of the building and it’s so big,” said Craig Kelly, Venerable Properties‘ president, as he stared out from the stage.

Empty wooden theater seats stared back. As Kelly strolled across the stage, hands in pockets, the sounds of his steps echoed against the walls.

“We could have turned our back on it and just sealed it off, and forgotten about it,” he said. “I mean I even had a guy that wanted to put a climbing gym in here because it’s 53 feet from here to the fly gallery. But I want to make this the heartbeat of the building.”

Later this month, after four years of brainstorming, Venerable Properties will begin its long-awaited redevelopment of the 89-year-old ex-school in Southeast Portland. The firm will look to preserve the building’s historic character while creating office, retail and event spaces – and fill a neighborhood niche.

Venerable will close on its $2 million purchase from Portland Public Schools next week, and has financial backing from PacTrust, a national firm based in Portland. Kelly wants it to be a legacy project – not only for himself, but also for his late friend Art DeMuro, Venerable’s founder, who died from cancer in September 2012.

DeMuro and Kelly began looking at Washington High School in 2009. They loved it from the start. Like the White Stag Block or Fire Station No. 7 – two of Venerable’s successful preservation projects – the school had style. Kelly plans to maintain the old IBM clocks, intercom systems and hallway lockers – every tenant will be assigned one.

When DeMuro recruited Kelly in 1994, it was to take on those projects that no one else could. Finding a higher and better use for 117,000-square-foot Washington High School certainly qualified. The original concept called for multifamily housing.

“We spent two years and a lot of money and time, and frankly went through 10 different planning sessions, to try and come up with a housing project that could work here,” Kelly said. “The zoning is for housing and the neighborhood really wanted housing here, but it can’t pencil unless you completely destroy all the fabric of the building.”

For instance, to accommodate double-loaded apartments, the 15-foot-wide hallways would have needed to be demolished. The spacious 13-foot-high classrooms and the auditorium also would have had to go. Instead, Venerable is featuring those spaces.

“We’re trying to walk a fine line about how to be hip and contemporary while nodding to the past,” said Steven Ehlbeck, an architect and higher education studio leader for SERA Architects, which is designing the project.

To that end, things like chalkboards and pencil sharpeners will stay, while old wall paints and mechanical systems will be upgraded, as will bike parking and shower spaces. Venerable is reserving 18,000 square feet on the first two floors for service retail (like medical, dental or insurance tenants), and SERA is designing outdoor walkways and plazas to connect those businesses. Another 55,000 square feet on the third and fourth floors will be creative office.

SERA is also designing a rooftop terrace for events. Ehlbeck said one challenge is the idiosyncratic grid of the building’s structural system. Unlike modern buildings that typically have uniform spacing for load-bearing beams, Washington High School doesn’t. So, any additions for rooftop gazebos and the like must be coordinated carefully. Some unique geometric structures may result.

“That has been an interesting challenge and has spurred some exciting ideas,” Ehlbeck said.

Kelly has ideas about the community he wants to foster in the building. He plans to annually take a class photo of the building’s tenants and hang it in a hallway. The class of 2014 will include people from Bremik Construction (the project’s general contractor) and KPFF Consulting Engineers, among others.

Also, a third-floor trophy case (donated by the class of 1931-32) will be preserved and filled with a mix of old and new memorabilia.

Kelly hopes the property’s proximity to burgeoning inner southeast neighborhoods will make it an attractive alternative to downtown Portland for bike commuters. No tenants are lined up for the 100 percent speculative project, but Kelly has faith that if he builds it, they will come.

Venerable also got a small boost recently when it closed on the $2 million sale of its Industrial Home property at 200 S.E. Martin Luther King Jr. Blvd. Before DeMuro died, the firm had hoped to restore the building, but now a Seattle-area developer will transform it into creative office and retail space.

As for the Washington High School auditorium, Kelly can already envision wedding receptions, or a Lyle Lovett performance. DeMuro’s death threw the redevelopment plans in the air, but Kelly said passing on the $18 million project was never an option. Even though they hadn’t quite ironed out their plans, DeMuro, before he died, entrusted Kelly with the project and told him he would make the right decision.

“It’s been a struggle,” Kelly said, gazing out over the empty auditorium seats. “Not to get too philosophical, but I kind of think he’s with me. So I don’t really feel alone. But yeah, I miss my buddy to be the sounding board … I’m doing it, maybe, different than he would have, but that’s OK. This is a good period at the end of my friend’s sentence. I’m not just doing it for money here. I’ve got to finish something that needs to be finished.”