Prosper Portland‘s board has approved a $1.1 million predevelopment contract with Mortenson to move forward on a 10-story office building atop a parking garage near the Oregon Convention Center, despite some misgivings.

The funding will advance design of the 140,000-square-foot building at Block 49 in the Lloyd area. ZGF Architects is designing the project.

“We realized that just building a stand-alone parking structure wouldn’t fully realize the opportunities available at this site,” Eric Jacobson, a Prosper Portland project manager, said during a Board of Commissioners meeting on Jan. 16. “That’s when we began planning for an office tower atop the building.”

Commissioners allowed the design process to go forward, but some said they had unanswered questions regarding the strategy behind the project and its commercial viability.

“It’s a massive investment,” Commissioner Peter Platt said, adding that he wants more information about the project’s future financial performance and public benefits.

The building should be at least 50 percent preleased before construction moves forward, Commissioner Francesca Gambetti said.

“The risks are very real and significant,” she said.

The 442-space garage, now under construction, is expected to be completed in June, Jacobson said.

Designs for the building project could change during the city’s design review process. The predevelopment contract will enable the project to gain design approval, Jacobson said.

At the board meeting, Jacobson estimated hard costs for the project at nearly $57 million, with financing and other costs bringing the total to approximately $77 million. The agency has since dropped plans for an additional 100 parking spaces on one-plus decks, reducing expected costs to around $72 million, he said.

Parking was eliminated after a feasibility study pointed out that office and hotel parking peak at different times, he said.

Demand for office space should be robust in the Lloyd area, Jacobson said. The office vacancy rate in Lloyd was 2.2 percent, compared to 11.6 percent in the Central City overall.

“This is really a great piece of real estate,” Jacobson said. “It has tremendous access within the Central City. It has tremendous access to transit service. It has great visibility, and it has tremendous access to (Interstate 5).”

Prosper Portland would own the office space. The agency does not plan to move its own offices there, spokesman Shawn Uhlman said.

Prosper Portland has contracted with Jeff Falconer of Capacity Commercial to pursue potential tenants.

“The Eastside is a cool place to be,” Falconer told the board. “People live here, work here and it is really becoming a desirous location for all of these tenants. Who thought Autodesk would come in and take the entire Towne Storage building? I don’t think anybody thought that.”

Jacobson said he hopes to receive the Design Commission‘s approval for the project by May. The Prosper Portland board will be able to weigh in on future design work, leases, financing commitments and a construction contract.

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