A $1 million deal between the city of Redmond and a California investment firm could revive the New Redmond Hotel, a historic downtown landmark vacant since 2005.

The Redmond City Council, acting in its role as the Redmond Urban Renewal Agency, agreed Tuesday to spend $1 million toward renovating the 89-year-old hotel. Alpha Wave, an Orange County, California, based hotel investment group, will then come up with the remaining funds for the purchase and renovation work involved in the $5.25 million project.

Chuck Arnold, Redmond Urban Renewal project manager, said the city sees reopening the historic hotel as a high priority, and was interested in forming a public-private partnership with Alpha Wave.

“That is what we are in the business to do, leverage that private investment,” Arnold said Wednesday. “A 20 percent investment of public dollars for 80 percent private. That’s how we help stretch the taxpayer dollar.”

The 43,500-square-foot hotel, located at 521 SW Sixth St., is one of the largest buildings in downtown Redmond.

The second and third floors have 48 rooms that have been empty for more than a decade. The ground floor currently is occupied by Red Martini Wine Bar & Grill; Oishi, a sushi restaurant; and AK’s Tea Room.

The hotel has been on the market since it closed, and the Bend-based owner, Groza Family Trust, has maintained the building, Arnold said.

Two prospective buyers showed interest, but the sales fell through in the fall of 2014 and late summer of 2015.

Ken Cruse, CEO and co-founder of Alpha Wave, said his investment group was intrigued by the hotel’s location and significance to the city. His vision is to create a hip, boutique hotel with a room-rate of $120 per night.

It will stay true to its historic roots, but will have modern elements, such as LED lights, Internet access and water-efficient fixtures, Cruse said.

The $1 million from the city will likely help with infrastructure projects such as new plumbing and an upgraded heating and air conditioning system. Overall, Cruse expects the renovation budget to be $2.5 million.

Cruse said he plans to make the sale final later this summer, and immediately start renovation. An opening for the hotel is scheduled in the spring of 2019.

“There is a lot of work that needs to be done to get it operational,” Cruse said.

The hotel was named New Redmond Hotel when it replaced a wooden predecessor that burned down in 1927. It is one of three buildings in Redmond listed on the National Register of Historic Places. The businesses on the ground floor will continue to lease their locations.

Because of the hotel’s historic significance, Alpha Wave is seeking federal and state tax credits and funding meant to curb some of the renovation cost.

Redmond Community Development Director Kate Porsche said the city has an increased demand for hotels, especially with all of the travelers at the Redmond Airport.

“We would really like people who fly into Redmond to stay in Redmond,” Porsche said.

Giving people a place to stay will directly benefit the city’s economy by boosting foot-traffic at local downtown shops and restaurants, Porsche said.

Part of the agreement to provide $1 million hinges on the fact that Alpha Wave will guarantee to use the building as a hotel for at least 10 years.

“For us, it was very important that it be a hotel,” Porsche said. “Not only is it going to be made beautiful again, but it’s going to be filled with people and life.”

— Reporter: 541-617-7820, kspurr@bendbulletin.com