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Last fall, after two years of planning and searching for funding, developers Josh Fuhrer and Vern Rifer were on the cusp of attaining financing for Ivy City Homes, their mixed-income housing project on Martin Luther King Jr. Boulevard. They had expected to break ground by last month.

But then, out of the blue, Fuhrer said, he and Rifer in November received a letter from the Portland Development Commission, which had offered almost $2 million in urban renewal money for the project, and the Portland Housing Bureau, which owns the property, that said the city was terminating negotiations with the developers.

鈥淲e had it designed and titled and funded. We were ready to go,鈥� Fuhrer said. 鈥淲e could have pulled a permit the next week and been under construction in the next three or four weeks.鈥�

Ivy City Homes, as designed by THA Architecture, would have had 28 units, including nine as affordable housing. When the PDC and the PHB withdrew funding, design had already been approved by the city and the concept had been vetted through a community visioning process.

Fuhrer and Rifer, working under the name Ivy City Homes LLC, had received a half-million-dollar predevelopment loan from the city. The project was a partnership between Ariston Development (Fuhrer’s firm), Vern Rifer Development, the PDC and Colas Construction.

Fuhrer said that the development team had lenders lined up who were waiting only for the project team to sign a Disposition and Development Agreement with the city of Portland. The city would guarantee to retire the balance of the construction loan if unsold units remained 24 months after construction.

鈥淭he city had agreed to that provision from day one, and we were in the process of revising a final draft of the DDA that said as much when we got their termination letter,鈥� Fuhrer said.

PHB Director Margaret Van Vliet said she and Bruce Warner, then the executive director of the PDC, made the determination to halt negotiations.

鈥�(For DDAs), we need to see that a project is making reasonable progress, and that there are lenders who are willing to step up and make a private commitment to leverage our funds,鈥� Van Vliet said. 鈥淚f banks aren’t willing to take a risk on the marketability of the end units, we ought to pay attention to that as well.鈥�

Fuhrer said that, at the time of the decision, neither the PDC nor the PHB had expressed concern to him about the project’s financing.

鈥淚f that had been the case, we would have been telling PDC we couldn’t go forward,鈥� Fuhrer said. 鈥淭he reasoning they gave us was that the market was not right. But it was just starting to loosen up.鈥�

In January, the PHB sent a budget memo to the mayor’s office officially reallocating the remaining $1.4 million designated for Ivy City Homes to another affordable housing project in the Interstate Urban Renewal Area. McCoy Village, an existing 55-unit apartment building at 4430 N.E. Martin Luther King Jr. Blvd., will be completely gutted and rebuilt. Caritas Housing, the housing arm of Catholic Charities of Oregon, will lead the partnership for the $13.4 million project.

鈥淭his is an important project in our portfolio because it has large family units,鈥� Van Vliet said. Some of the building’s apartments are rented by low-income and special needs families, she said.

鈥淲e have been scrambling to figure out how we can, along with the state of Oregon and private investors, find the capital to make the physical improvements so we can retain (McCoy Village) for the long term,鈥� Van Vliet said. She added that the need for money at McCoy Village had no bearing on the decision about Ivy City Homes. 鈥淭here was no cause and effect there,鈥� she said.

The future of the Ivy City Homes site, which the city calls the Grant Warehouse site, is uncertain. The city could proceed with the same design and concept with a different developer, because it paid for the predevelopment work, Van Vliet said.

鈥淭here was a reasonable public investment鈥� in the project, she said. For now, the Portland Housing Bureau will 鈥渓et the market simmer down a little bit more.鈥�

Portland Housing Bureau project manager Karl Dinkelspiel said he believes something will happen with the property soon.

鈥淚’ve had a number of inquiries recently; I would be surprised if we sat on it for a long time,鈥� Dinkelspiel said.