Comments on: Crucial condo project close to construction

By: Steve

Steve — Sat, 28 Aug 2010 00:00:51 +0000

I looked up the PDC link that Old Town noted and it shows the average sale price for the 57 units is $185,705. Well, that adds up to $10,585,185. I know there’s some retail space so lets’s say that’s worth $100 a SF or about $900,000. Maybe I’m misreading the proposal, but I don’t see how this adds up to cover the $14 million cost.

By: PDC votes to give loan to Killingsworth Station « Daily Journal of Commerce – Building and Construction News in Portland, Oregon and the Pacific Northwest

Fri, 27 Aug 2010 21:20:52 +0000

[…] Commission today passed a third amendment which cleared the way from a funding standpoint for the Killingsworth Station mixed-use project to move […]

By: Old Town

Old Town — Fri, 27 Aug 2010 20:12:00 +0000

The PDC Report 10-79 on this subject is an interesting read. Admittedly, my perspective is anti-PDC. There is just something inherently wrong about a project that initially razed houses on the land grabbed by PDC and that has taken 7 years to get to the point of starting construction. The number of houses actually razed is not mentioned. But from the mapping via portlandmaps.com it appears to be about 7 housing structures. Interesting is that the block is not vacant. A structure, Crown Motel, is apparently a TriMet us of land acquired for MAX and used for affordable housing. Still owned by TriMet. One wonders how PDC "acquired the land at the price of a little over $1 mil (portlandmaps) when 1/4 block of adjacent property was assessed at over $257 mil in 2003.. The "Financial Impact" section on page 5 of the report is a must read. It seems clear that PDC found itself in the position of having invested so much of the public funds that it couldn't pull the plug. So it increases the investment and contrary to its "assurances" that the funds are protected - they are not fully protected. The hint of the continuing risk comes from the Wells Fargo construction loan: "Wells Fargo Bank has committed to provide a conservatively underwritten (35 percent loan-to-cost) construction loan for the Project, which is approximately $3.644 million less than was anticipated . . . ." "The increased PDC construction loan would subject PDC to increased market risk . . . mitigated by the fact that WDC’s cash equity and profit potential are subordinated to PDC’s construction loan and WDC’s loan repayment guaranty. In addition, the developer will provide a personal guaranty for repayment of up to $3.58 million of the PDC construction loan for the Project." The cash equity - $263k. Profit potential means nothing if the project fails. $3.58 mil would not be a good ROI on public investment if the project fails, and there is doubt that a positive ROI will occur in any event. So just how good are the developer's "guarantees" if the project fails? This property has been off the tax rolls for 7 years and is not likely to contribute tax revenues for decades. PDC Report 10-79: http://www.pdc.us/pdf/about/commission_meeting/2010/0827/Report-K-Station-DDA-3rd-Amendment.PDF A Perspective

By: Steve

Steve — Fri, 27 Aug 2010 16:21:18 +0000

Until condominium financing for end users improves, this project is facing long odds success. Currently at least 50% (I’ve heard that has increased to 70% but haven’t verified that) of the project has to be sold before Fannie or Freddie will close any of the purchase loans, so 29 of these have to be sold before the 1st one can close. That is unless Wells Fargo has agreed to portfolio these purchase loans until the 51% hurdle is met. That little financing detail was skipped over in the article. I also remember reading recenly that Albina Bank has a failed condominum project not to far from this project that is being sold to Investors for cents on the dollar and converted to a rental project due to the poor market conditions for condominiums. Will the for-sale condo market improve by the time this project is completed? I hope so for the $11 million of tax payers money the PDC is dumping into this project. I think the risk of the project is shown by Wells Fargo only being willing to lend $4.6 million against a $14 million project. This looks like another public money boondoggle.