Prosper Portland‘s board of directors on Wednesday approved a low-interest $7 million loan to facilitate the sale of two buildings in Old Town Chinatown to a trio of footwear and apparel entrepreneurs.

The loan will aid the purchase of the Mason Ehrman Building and its annex. The property transaction will facilitate a much larger project: Backers envision a campus of nine to 10 buildings totaling 300,000 square feet, said Jonathan Cohen, one of the partners leading the effort.

Prosper Portland’s loan, made at a below-market 3 percent interest rate with a 15-year term, is a bet on a project with the potential to transform Old Town Chinatown into an economic hub.

“Every brand is going to want to be here, and every supplier is going to want to be here, near all the brands,” Cohen told Prosper Portland’s board.

The agency agreed to the loan despite a remaining $4.4 million funding gap for the project. Oscar Novelo, Prosper Portland’s senior business finance officer, acknowledged that the lack of full project funding brings “heightened risk” to the loan. But Novelo said the impending closure of escrow, and the project’s value, made it worthwhile.

“We do believe that the recommended conditions and the resolution term sheet will allow Prosper Portland to support the Made in Old Town initiative while also keeping the project accountable,” he said.

An agency staff report stated that eight letters of intent from prospective tenants, and the presence of an existing tenant, would provide stability for the project.

The project team is pursuing additional state funds and private funds to close the gap, backers said.

The project comes from Cohen, Elias Stahl and Matthew Claudel, who combine shoe-industry know-how with Old Town Chinatown business experience. The purchase will be made by Future Stack, a limited liability company that is wholly owned by the Old Town Perpetual Purpose Trust. The trust grew out of discussions by the Old Town Chinatown Community Association to preserve and revitalize the neighborhood’s historic buildings, the entrepreneurs said.

The group is advised by Jordan Ramis. Turner Construction will perform building renovations.

The project’s first phase is envisioned as two major spaces. At 234 N.W. Fifth Ave., the building dubbed “The Tower” will host suppliers, vendors, labs and office and makerspaces. A gallery of dozens of suppliers will offer something like an ongoing trade show, Cohen said. Meanwhile, “The Hub,” at 208 N.W. Fifth Ave., will include storage, studio space and brand suites.

Some tenants will function as long-term anchor tenants, while other emerging businesses will participate as pop-ups or kiosks.

Among the aims is to reduce production time domestically for footwear and apparel that is typically manufactured in Asia. A new shoe design can take 18 months to begin production, Cohen said.

“We’re looking to shorten that to days and weeks and months, instead of months and years,” he said.

The buildings recently were seismically retrofitted. Also, they feature large floor plates, brick walls, large windows and lengthy timber trusses.

“That already makes it a nice canvas,” Cohen said.

A third building, known as the “Engine” building, on an adjacent block, has been purchased.

The seven-story Mason Ehrman Building dates to 1908, and the two-story annex was added in 1940. The buildings are currently owned by Bayspring Real Estate Partners, a California firm that paid $14.25 million for the properties in February 2023. Bayspring considered an office-to-residential conversion before reaching agreement with Future Stack.

Board members also questioned the sale price. The property was appraised at $3.8 million, well below the $7.4 million purchase price. The appraiser’s opinion was that proposed asking rents were too high for the neighborhood, an agency document states.

Cohen said the appraisal was low, equating to only $38 per square foot.

“Pretty much no building in Portland has transacted at that value, at least in the last 50 years that I’m aware of, other than Montgomery Park, which was sold on the auction block, essentially,” he said.

Cohen noted that the Mason Ehrman Building was appraised at more than $300 per square foot as recently as 2019.

“Our aim is to reinvigorate with all of the purposes described here and get back to that valuation,” he said. “We are under contract to purchase the building for $75 a square foot, which we think is an excellent value because it’s fully seismically retrofitted … and well below the average in downtown commercial transactions.”

Prosper Portland’s board approved the loan in a unanimous vote. The Future Stack entrepreneurs said construction will begin presently, with the goal to open as soon as this summer.

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