91ÊÓƵ

C.E. John Co., a development firm in Vancouver, Wash., is poised to continue investing in the Northwest 23rd Avenue area in Portland. It has three projects in the works in the trendy neighborhood and it owns another lot there that it hopes to redevelop soon.

These projects include: a remodel of the Esquire Theater Building at Kearney Street; a new, 94-unit apartment building over ground-floor retail at Lovejoy Street; and a new, 25-unit, mixed-use project at Raleigh Street. The fourth project would be redevelopment of the Besaw’s building on Savier Street.

The Daily Journal of Commerce recently spoke with Tom DiChiara, vice president of development for C.E. John Co. and former managing director at Trammell Crow Co., about the projects and other topics.

91ÊÓƵ: You were with Mill Creek Residential – formerly Trammell Crow Residential – earlier this year. How did you wind up at C.E. John Co.?

Tom DiChiara: It was a tough decision for me, but I think my decision to come here was about getting to work on some different project types. It’s not just residential. We do commercial and retail. (It’s) an opportunity to work on some smaller scale projects, some infill-type locations. The TCR/Mill Creek merchant-build model is generally bigger, institutional-scale projects. I think I saw fewer opportunities of those moving forward than probably the last decade with the market changes. The opportunities now are on the more neighborhood-scale projects where people want to live and work.

Also, it’s a well capitalized, locally owned company with local decision making, so there’s some advantages to that. It’s not an institutional, merchant-build model. There’s pros and cons to that, but we’ve got a good book of business put together and I think over time – C.E. John tends to look at development on a generational timeframe as we build for our own account – we are looking positive. The merchant-build model is different. It’s more about timing. Obviously, a lot of people didn’t time things right. It’s just good to be back working on projects after warming a seat for a few years.

91ÊÓƵ: What is the attraction to Northwest 23rd Avenue? Why is now the time to move forward?

DiChiara: Northwest Portland has always been a stable, desirable place to live, work and visit. That hasn’t changed. It’s also a part of town that didn’t see a lot of development during the boom cycle. Other than Park 19, there was really no new multifamily. And also, there was a period of a lot of loss of rental housing to condominium conversions. So, I think we have a net loss from where we were a decade ago in Northwest.

And it’s a great place to live. It’s where I lived for a while when I first moved to town. I think the active streets and the walkable neighborhood and the streetcar – all of those factor into it. Plus, the rent levels are strong there too to help with the economics, as are the retail rents. Those all factor into why now. We’re big believers of the area for the long term, as is the family. They’ve made the investments and now we’re ready to make a further round of investments in the properties we have.

91ÊÓƵ: Are there any other areas you have targeted for projects or property acquisition?

DiChiara: I think we’re always focused on the close-in neighborhoods where ‘there’ is already there. You know, where the retail is always thriving and people want to live (and) where we can infill and build housing where it’s desired. With TCR, I’ve done my pioneering projects where I’m waiting for the market to get there. Sometimes that doesn’t work out well. The established sites, it’s already there, but they have new challenges, like just finding lots. (Northwest) 23rd (Avenue) has all those things going forward, and is still close to downtown.

91ÊÓƵ: So, is Portland the main area of focus?

DiChiara: It’s mostly Portland-focused right now. We still have some retail in Beaverton with a shopping center out there and an expansion we’re working on. It’s a different challenge out there, trying to make an aging shopping center something that is new and transit-oriented … (and) prepare it for the next cycle of its life. As we grow we might branch out, but right now Portland is keeping us busy.

91ÊÓƵ: I see that a lot of the people that came out of Trammell Crow are working locally around the industry. How has that experience helped you?

DiChiara: I joined TCR after practicing architecture for a decade. I didn’t have much specific real estate experience. I learned a lot there. It’s always been a great company with a lot of smart people working there. I was able to absorb a lot with the people I worked with both locally, regionally and nationally. Those relationships in the institutional world were very helpful in the types of developments I’m doing now, even if they’re more regionally focused using our own capital.

It’s always been an incubator. They’ll come and learn the business and then they elect to spin off their own companies. I think a lot of that is cyclical with the markets and how they work.

TCR and the Crow family provided the financial bench strength and connections to institutional capital sources, but the overall company was really a collection of individual local and regional partnerships. That entrepreneurial culture is probably the main reason why over the years some partners, some offices and even some divisions have split off to form their own companies. As you know, many of those spin-offs have grown into national companies, such as Holland Residential, Avalon Bay, Wood Partners, etc.

91ÊÓƵ: You aren’t the only firm pitching, and working on, urban infill-type projects. Was that the lesson learned from the last cycle?

DiChiara: There’s always been cycles, but the enduring neighborhoods are always the enduring neighborhoods. There’s always going to be more stability downtown compared to the suburbs. TCR, from a business point of view, has been a lot less successful in the suburbs compared to the urban markets – at least in the last decade. Those commodity markets and that product type are just all about timing. Then you see the demographic changes (and) people wanting to live closer to work and all the traffic and transit issues. There’s a national push for transit-oriented, mixed-use urban infill-type projects. Portland has been ahead of the curve on those projects.

Lessons learned … that’s difficult. A year and a half or two years ago I don’t think anyone expected the multifamily market to recover as quickly as it did, both from a value and fundamentals standpoint. Then there’s a little froth in markets like Seattle, and everyone is doing all the same things they were doing right before the recession. So I’m not sure they did learn a lesson.

That stuff comes from a merchant-build mind-set. Investing in real estate for the long term is the way you need to look at it. And it has to work on the long term. You can’t rely on events. That’s the goal. It’s not always easy to make the numbers work, but it’s what we strive for.