It’s been nearly two decades since the Portland Development Commission identified a as its top goal to bring money and tourism to the area. Since then, the project has been intermittently studied, put on the back burner, sent out to bid and handed over to different agencies in town.

David Woolson, the new director of the Metropolitan Exposition Recreation Commission, says it’s still anybody’s guess whether the hotel will happen. Since he was hired four months ago, he has focused almost solely on working out the details of the yet-to-be-built Headquarters Hotel.

In February, regional government from the Portland Development Commission. MERC’s role, Woolson says, is to advise Metro about whether building the hotel is a good idea.

His experience as an entertainment lawyer and director of the Oregon Film & Video Office comes in handy, he says.

“A lot of what goes on here is entertainment-related,” he says. “I am able to be a resource as far as my deal-making background.”

91视频: Heather Olson (MERC’s capital projects manager) told me you were diving head-first into the Headquarters Hotel issue. Where are you with it?

David Woolson: The Headquarters Hotel project has been talked about for 19 years. Before Metro took the project, this was a PDC project in earnest, really for about two years, where they did a variety of feasibility studies. In November of last year, the PDC came to the conclusion that they couldn’t make a deal under the private ownership model.

91视频: That’s when they switched to a public ownership model.

Woolson: Yes. When you look at the private equity that was being put up, with the public subsidy they had to pay, there was at least a $20 million gap. It wasn’t voted down by anyone; they just couldn’t make the numbers work. At that point, the decision was made that, since there was a lot of work done already, Metro would take it from there, exploring a public ownership model, which has been used in other markets like Denver, Austin and Chicago.

91视频: When you were at the Planning Commission (in June), one of the commissioners asked whether this is about filling a $20 million gap. Are you having to start from square one on financing on this?

Woolson: There was a square-one financing. The OCC operating is a separate issue.
But, if we do more convention business because of a headquarters hotel, does it help the OCC? Yes. It’s good business. Should we build a headquarter hotel solely to help the finances of the OCC? I don’t think so. It’s a by-product; it’s a secondary issue. The evaluation, the analysis, is really on its own. Does this thing make sense as a feasible project?

91视频: What’s the answer?

Woolson: We’re getting the data on this as far as the need, the demand, the economics, etc.

91视频: It’s 19 years in the making. Why has it taken so long?

Woolson: I don’t have an answer for that.

I haven’t been working on it 19 years. I’ve been working on it since May 1. For Metro, President David Bragdon made it very clear when I came in that we are not going to spend months and years talking about the Headquarters Hotel. We are going to very quickly gather the data and make a decision. I can’t address what’s happened before, but Metro took this on in February and will make a decision by the end of September.

91视频: Do you get a sense that the public even cares whether this happens or not?

Woolson: I don’t know. My sense is that they should because the fact is that as far as the tourism industry, as far as the convention business, it’s great business for Portland and for Oregon.

It was Tom McCall’s rallying cry. They come, they spend, they go home. It is also a gateway to introduce people into the community as far as other tourism, other business relocation, coming back for tourism-related things. The convention business is good business for the community.

91视频: With public financing and private management, is it unfair to private hotels in this area to compete in that way?

Woolson: One of the things that (various studies)will address is what the impact on the local hotel industry will be. The experience in other markets is that it’s a dip in occupancy as rooms come in the market, and then those are absorbed and it can induce demand.

But I understand that certain hoteliers raise that question. It’s a fair question. I don’t have a specific answer for it.

91视频: In talking with hoteliers, what are their concerns and how do you quell them?

Woolson: Understand my position on this thing. I’m not here to advocate or sell a hotel.

It’s my job as been asked by Metro to evaluate whether this is a good tool for the market as an economic development driver to help maximize economic impact. Then the question is, is it feasible? It’s really presenting the data of what we have found out. I am not, my job is not to sell this Headquarter Hotel. It doesn’t make sense. It’s helping to make the right decision.

91视频: Do you feel pressure that the only answer you’re going to be able to give is, “Yes, this is feasible”?

Woolson: No. I don’t feel that, because I don’t think we’ve accomplished much if, at the end of the day, we’ve got it built but it’s not the right decision, and two or three years later we regret it. We need to come to the right conclusion up front.

91视频: Will there be fallout if Metro does decide that it is not feasible?

Woolson: I don’t know how to answer that. The fact is that while there are some hoteliers that are concerned about the impact, a fair concern, at the same time there are a lot of folks that very much feel when conventions are in town that’s a positive thing. It’s a mix, in fairness.

Will some folks that have been advocating this for 19 years say we need this? I can’t really speak for them. That isn’t my job. It is purely to ask how we get through this complicated issue and come to the right decision, and we’re helping Metro do that.

The post MERC's Woolson muses on future of HQ Hotel appeared first on Daily Journal of Commerce.

Portland is up for sale.

In the last few months, two major real estate transactions have signaled a change in the city, where outside investors that have historically gravitated toward larger West Coast cities like Los Angeles and Seattle are beginning to see Portland as a viable moneymaker.

In July, 19 stories of the 30-story KOIN Center were sold for $108 million to California investment group CommonWealth Partners. Then just a couple of weeks later, development firm Gerding Edlen sold Brewery Blocks 1, 4 and 5 – a total of 660,000 square feet – to buyers represented by New York’s JPMorgan Asset Management. The price tag: a whopping $291.6 million.

David Hill, vice president of investment at Grubb & Ellis, whose firm was not part of either deal, says the transactions indicate Portland is priming itself to eventually transition from a second-tier market to a first-rate investment hub.

“We’re in an environment where people are trading real estate more,” he says. “As you have an appreciating market versus a flat one, there are going to be more people looking at their investments and saying, ‘We can get something for trade.’ A lot of the larger local owners have held real estate for so long. … But now that we’re getting some outside groups more inclined to invest, it’s looking more desirable to sell.”

91视频: The Brewery Blocks sale and the KOIN Tower sale were two huge transactions. One of the interesting things is that both of the owners sold to out-of-state investors. What implications does that have for Portland?

David Hill: There are a couple things going on. There’s so much demand for investment real estate right now nationally that national companies are reaching outside the normal, premium markets like Washington, D.C., New York and Los Angeles. Portland has shown to be of very strong interest, and there’s high demand to invest here.

91视频: What happened to Portland that has made it so desirable?

Hill: There seems to be a trend of investing on the coasts. In real estate, a lot of the money is concentrated on the East and West Coast. When you look there, there are only so many opportunities to invest money. These other markets are becoming very expensive. As expensive Portland looks right now, it’s a deal relative to some of the other markets.

But also, the trends in Portland are positive. We’ve got strong land-use, good transportation programs; job growth has been better than most areas. Even when our economy wasn’t doing great a few years back, we still had in-migration. Portland is in a lot of top 10 lists for green, biking, all that stuff. So it’s a good story.

The other thing is the office market is very tight right now. The micro-factors – supply, demand, absorption – all those rates tell a very strong story about the opportunity for rent growth, appreciation and making good money on your investment.

91视频: You said the out-of-state demand for investment is hot right now. Why is that?

Hill: As we came out of the dot-com crash and the stock market problems in early 2000, institutions started putting more and more money into real estate as a more tangible asset. Even though their allocations aren’t huge relative to everything else they’ve invested in, I think a lot of the groups even doubled what they’re spending on real estate, so there’s that much more money being spent.

At the same time, the economy has caught momentum, so the investments made in real estate over the last five years for the most part have been very successful. They continue to perform well. More money wants to get in. It’s a cycle of ever-increasing demand for real estate.

91视频: For the development companies that have sold these large amounts of property, what does it mean for them? Are they pooling money to build elsewhere?

Hill: Everything is cyclical, so there are some people that say pricing is very good right now – let’s cash in and take advantage of that right now. For the most part, though, I think they’re going to reinvest it.

A group like Gerding Edlen, they’re developers. That’s what they do; that’s what they like to do. Now they’re going to have more money that they can put into new projects, create new opportunities. Because they’ve had a successful investment, there’s probably going to be even more people that want to work with them and groups like them to invest in real estate and make money themselves.

91视频: Are there any disadvantages selling something like the Brewery Blocks, which so define Portland, that to sell them to outside investors might reflect badly on the developer?

Hill: I think it’s a non-issue. People buy the real estate in order to make money. To be successful they need to keep the real estate looking nice. They need to attract tenants to the property, so they’re going to be very motivated to make a property like the Brewery Blocks even better.

They have so much invested, they really need it to perform. It’s possible that they’ll feel a little more pressure to maybe increase rents over time, but whether they want increases, the market ultimately decides what the rents should be.

I think it’s positive because there’s more money coming into this market and frees up money for Gerding Edlen to go out and do more projects. People on the street, in the businesses, would rarely have a sense of a change of ownership.

91视频: Did it come as a surprise at all to the commercial real estate community?

Hill: It was interesting when we heard they were going to sell it, a bit of a surprise. But it didn’t take long at all to say that makes sense. They’ve taken it from start to finish. The market for real estate and even this type of real estate is probably as hot as it can be. Sure it could be hotter, but it seems to be good timing. Ultimately developers want to have access to the equity in order to do another development.

91视频: What is the benefit to the out-of-state investor to buy the Brewery Blocks or KOIN Tower?

Hill: Well, it’s about getting returns for their investors. Much of the money is pension fund money. They can either put it in stocks or bonds or real estate. So, the benefit is that they think they’ve acquired an asset that will perform well in the long term.

91视频: So these aren’t short-term investments?

Hill: Not with the Brewery Blocks. It’s what you would consider a core property. It’s operating at a very high level. It’s more of a guaranteed investment. In the long run they may get a lower return, but there’s more certainty there. We have seen a lot of sales in this market recently, a lot of activity have been groups that would buy and hold for three to five years and sell them. The Brewery Blocks is not likely that kind of investment.

91视频: What’s the motivation to hold onto something for a shorter period of time?

Hill: Some groups are focused on what we call value-add opportunities, a higher yield. They’re just looking to purchase, have something on that property occur that will spike the price and then sell that. That way they can show a high return over a narrow period. If you buy because there’s vacancy, you get it leased and it’s worth a lot more. If you sell that right away you’re showing a high return on that money. If you then hold it for another five years, you even the return out over that time.

There are groups that are out there looking for that value-add opportunity with a higher return over a three- to five-year period. And then there are groups, like the one that bought the Brewery Blocks, they buy with a longer-term perspective.

91视频: What are examples of value-add investments here in Portland?

Hill: The U.S. Bancorp Tower that sold in 2004 for something like $165 million and sold in 2006 for ($286 million). They went in there, got the space leased, the market got hotter and they were able to sell it.

91视频: Is there ever a chance that Portland would become a first-tier

market?

Hill: Certainly. It’s not three to five years out. It could be 10 to 20 years. In fact, we’re in the process of selling the Port of Portland headquarters building. It would be a value-add kind of investment. There are a lot of people pursuing the investment, and one investor said to me, “We think Portland is great now, the trends are great.”

We also believe that it’s very possible that with all the start-up companies and organic growth, it’s not that far-fetched to think that something big could grow out of these companies and create the Googles, the big companies, that can develop out of the kind of activity going on in the market and all of a sudden have a couple of big corporate drivers. Portland at this point, growth is generally smaller, organic. It’s not big, corporate America. I think that’s going to limit it being a top-tier market. But something may develop out of here long-term.

91视频: So we’ve talked about Portland getting more into the national scope. Are we anywhere near being in a global investment market?

Hill: No. If you’re bringing money overseas, that’s a stretch to begin with. If you think about having money here in the U.S. and you have money to invest, you buy an office building in Paris or London.

That’s easy to justify. When you start naming second-tier cities in countries that people don’t know much about, it’s much harder. You’re typically doing it with other people’s money too.

91视频: Can you think of properties here in Portland that would be great candidates for outside investors?

Hill: Any piece of real estate has opportunities. The biggest challenge is getting willing sellers. If I knew some willing sellers, to answer your question, I’d be sitting down with them right now. There’s really nothing that stands out as an opportunity.

The post Outside investors eye second-tier Portland appeared first on Daily Journal of Commerce.

Developer George Hale isn’t worried that his latest condominium project, 12.5 at the corner of Northeast Knott Street and Seventh Avenue, isn’t selling like hotcakes. Of its 13 units, two units have sold and there are offers on two others.
In Portland’s recent past, condo projects in the city have reached pre-sales records, some – like South Waterfront’s John Ross or The Harrison condo conversion in downtown – selling nearly all of their units before the projects were even off the drawing boards.
But Hale, whose expertise is infill, says the tides are changing. Portland’s housing market is cooling, and 12.5 is on track with the city’s 20-year sales history. Plus, 12.5 isn’t for everybody, he says. People either love it or hate it, and he’s only interested in those who love it.
Hale – whose infill projects include row houses and townhouses in Southeast, Northeast, North Portland, Redmond and Gresham – argues infill is about pushing the limits of urban design, not about fitting with the neighborhood. It’s about incorporating modernity into historical neighborhoods, and with the influx of a young creative class entering the home-buying market, Hale says that customer base is waiting for more.

91视频: Are there some parts of Portland that are more open to infill than others?
George Hale: Typically I think of infill as like an older, established neighborhood. It used to be different because in those neighborhoods, you used to have a lot of houses that either got burned down or got so dilapidated that (they were) torn down because people figured an empty lot was better than a dilapidated house. I found it easier to do infill because nobody else was building new houses in these older neighborhoods. I always thought these neighborhoods are great. They’re close to the city. You’ve got this core of shops that you can walk to. I thought if I’m going to live somewhere, this is where I would want to live. That’s why I was building the infill. I could understand it. I knew the kind of person who would want to live there. I filtered everything through my eyes.

91视频: One of the arguments against infill is that it gentrifies a neighborhood. What do you think about that?
Hale: I don’t think that’s a bad thing. For the most part, you see lifecycles of neighborhoods. Particularly gentrification of close-in Portland is driven by a couple factors. One is the urban growth boundary. To develop we have to do it inside the UGB. Number two, I think Portland is a really cool place to live. I think close-in is a neat place to be. That’s part of what’s driving the gentrification of the historically overlooked areas.
91视频: Another argument that comes from established neighborhoods is that proposed infill projects look out of place. How do you reconcile that as an infill developer?
Hale: That’s the nature of infill. A lot of times things aren’t going to fit it. Take the 12.5 condos for example. Does that fit into the neighborhood? I think you can argue yes and no. Does it look like the old 1920s and 1930s houses? No. But that’s today’s representation of what those houses were.
91视频: We’ve also got in place the Design Commission and the Historical Landmarks Commission, and they’re scrutinizing each project that comes along. I’ve heard arguments from developers who say they could have done so much more but had to scale it back because of the commissions that are in place. What do you think about that?
Hale: To tell you the truth, I don’t know 100 percent about what’s going on there. I try and stay away from a lot of those design overlay districts because I like to have creativity in my projects, and they control the creativity.
I will say that in a lot of districts, having a second set of eyes look at it and drive the design probably helps. Look at downtown Lake Oswego. They redesigned a block downtown, a mixed-use building with retail and offices. The city was very involved in driving that design, and it’s really done a lot for the downtown.

91视频: That brings up an interesting dichotomy, the difference between urban infill and suburban infill. It’s seeped out into the suburbs, where people are calling it new urbanism. People want to live in the suburbs and not feel like they’re in suburbia. When you’re working in the suburbs, do you have to take on a different mindset?
Hale: I think so, just because your demographic is different. Your end user is different. As a developer you have to target your markets. Typically they are different in suburbia.
You’ve got a lot more families. You’ve got a lot more people with kids. Close-in Portland, you do have families but I think for the most part you also have a higher concentration of young people, single people, couples with no kids. It’s a lifestyle choice.

91视频: Do you have a family?
Hale: Yes, three kids.

91视频: Did you ever live in close-in Portland?
Hale: Yes, we lived in Southeast. Then I moved to Raleigh Hills and now I live in Lake Oswego.

91视频: Was it because of your family?
Hale: It was partly driven by that.

91视频: So the mindset you take when you develop for suburbs, you can relate to because you have started a family and left the city.
Hale: Yes. But I feel like I can relate to the single, downtown person more than I can the suburbanites. I enjoy relating to the downtown creative types more. They’re more artistic, whereas the suburban stuff is very “Leave it to Beaver.”
What’s happening is that modern design is now creeping into family life. It’s more acceptable today to have kind of a modern-designed house. When you’re doing modern design for families, the person who wants a modern-designed family home is incredibly specific about what they want. So you have to do a custom house. We’re more spec builders here.

91视频: When you first started developing 12.5, you weren’t that interested in sustainable features, but you turned around on it. What was that about?
Hale: A couple of things happened. I met the contractors (Barrs and Genauer Construction), and they’re completely into sustainable development. Then I read an article about Wal-Mart. They wanted to use their weight to have a better impact on the world. I thought if they’re going to do it, I should probably do it too.

91视频: What was it about sustainability that made you not consider it in the first place?
Hale: It was the cost. It does cost more to do sustainability. There’s no doubt about it. And I thought people don’t really care. They’re not going to want to pay. And I still don’t know if the buyer wants to pay more. They want sustainability but they don’t want to pay more.

91视频: The 12.5 is completely built. Most of the time you hear of condo buildings being pre-sold before construction. Does it make you nervous that 12.5 isn’t selling like that?
Hale: Yes and no. Historically speaking, you have a condo project and if you’re not 95 percent sold out before it’s finished, something’s wrong. That’s happened over the last two or three years. But in reality, if you look over the last 15 to 20 years, we’re exactly where we’re supposed to be. It’s on track with normalcy. As developers we have to step back from what happened in the recent past and think about what’s normal. Yes, it’s scary because as a developer you always have this fear that it’s not going to sell. But you know theoretically it’s going to.

91视频: What becomes the point where you say, “OK, these really aren’t selling and we need to lower the price”?
Hale: It’s a function of traffic, feedback you get from people, feedback from buyers and real estate agents. It’s a combination of all that. Right now we have great traffic. I know our competition. We really don’t have any. Unique buildings like this, that’s more than just a house and a place to live; it’s artwork. People walk in and either hate it or love it.

91视频: You said you really don’t have any competition. What did you mean by that?
Hale: Well, competition as far as modern-style town houses. Right now if somebody wants a condo that’s close in, there are a couple three- or four-story buildings. But for a modern-style condo where you drive into your garage and go right into your unit, there really aren’t a lot around.

Tearing down a legend
A resident of Lake Oswego, Hale found himself in a sticky situation earlier this year when he bought and intended to tear down the house adjacent to his own – a house that happened to be designed by Pietro Belluschi, the man behind the Portland Art Museum and the Equitable Building in Portland.
91视频: What’s the story behind the (Pietro Belluschi) house?
Hale: So, the Belluschi house is next door to where I live. What’s been going on in my neighborhood is that people tear down houses and build a house next to it in its place. So, my wife and I decided to buy the house and build a house that we really like there and that we think is going to go well next to our house.
I bought it, applied for a demo permit, and it turns out it’s this Belluschi house, a famous architect. Me, I look at the house and its garbage. The guy who lived there for 60-something years did nothing to it. It was all dry-rotted. I met with a man named Tim Mather (owner of MCM Construction in Lake Oswego). He said this was an architecturally significant house and asked if he could take it. I said, “If you want to, go for it.” So he spearheaded taking the house apart, numbering it and putting it in storage and rebuilding it. I don’t know that he knows where it will go yet, but there’s a pool of four or five people who want it.
91视频: Did you feel like the bad guy for wanting to tear it down?
Hale: I didn’t. My wife’s uncle was one of the partners at Boora (Architects), and I ran it by him. He said not all great architects make great architecture. I’m glad somebody found value in it and is going to do something with it, but I don’t think it was really architecturally significant.
91视频: Would it be a blow to your ego to know that somebody might do that to your projects one day?
Hale: Emotionally, sure. When you build something you invest your time and effort into it. It’s a little part of you. But intellectually, I’d say if it’s past its lifecycle, that’s what has to be done. It’s all part of the nature of infill.

The post Infill as art: a developer’s dilemma appeared first on Daily Journal of Commerce.

The Portland Development Commission, City Hall and various nonprofit groups can’t agree on how much there is, but they all agree there’s a lack of affordable housing in Portland. The nonprofit Northwest Pilot Project estimates there are only 3,000 units of affordable housing in the city. PDC says the number is closer to 10,000. And affordable-housing builder Host Development Inc. estimates Portland needs around 12,000 more units to close the gap.
Without public subsidy, says Ted Gilbert of commercial investment firm Gilbert Bros., developers rarely build affordable housing. Because construction costs per unit can reach up to $200,000, selling units at below-market rates means the developer loses money.
Gilbert, who is chairman of Host’s board and a board member of the Portland Affordable Housing Preservation Trust, argues that the smart way to fill the affordable housing gap is to buy existing buildings – which sell for as low as $30,000 per unit – rehab them and put them on the market at a price low-income families can afford. It’s a private-sector approach to what he says is considered largely a public problem.

91视频: Median family income aside, what does affordable housing really mean?
Ted Gilbert: It’s a large spectrum. Affordable housing ranges all the way from homeless to very low-income rental and special-needs populations to work-force housing on a rental basis to affordable homeownership and trying to reverse the family flight that’s going on in this community right now. Young families with children are leaving the city in search of more affordable housing.
If you don’t have to spend more than 30 percent of your income, according to the government, that’s affordable. For somebody making minimum wage, or single moms, which is our single biggest demographic at Host, 30 percent of median is a modest apartment, let alone getting to own something. But affordable housing has developed as this cottage industry.

91视频: What does that mean?
Gilbert: There’s competition. There’s a zero-sum gain where everybody feels like they’re competing for a finite and scarce resource, which is primarily federal, government-subsidized money, whether it’s low-income tax credits or TIF money, a 30 percent set-aside. They’re all competing. There’s a mindset that, if someone else is getting it, there’s less for my constituency. That’s counterproductive for the whole community.

91视频: How do you change that?
Gilbert: I look at it from a private-sector model. Call it enlightened capitalism. We have to recognize that it’s in our self interest to have a healthy housing climate here. There are ways you can make it pencil with affordable housing without these enormous subsidies. The traditional method isn’t bad, but it’s a limited resource, and frankly it’s a tremendously inefficient delivery mechanism.
Most of the new affordable housing that you hear of on a rental basis is new construction that today will cost you probably $200,000 a unit. It may help with neighborhood resurgence, but even if it’s going lightning fast, it’s going to take two years to build. How many are going to become unaffordable in those two years?
We can buy existing buildings faster and cheaper than new buildings.

91视频: Is there enough inventory in the metro area to turn existing buildings into affordable housing?
Gilbert: Last time I heard, the housing gap for those most in need of affordable housing was 12,000 units. The number that get built a year through that traditional construction mechanism is maybe a couple hundred in two years. We will never get ahead unless we can go to existing buildings and preserve them.
We’ve bought 525 units to date. It’s not a ton, I grant you. But the model works. We buy an existing unit. My guess is, of the 525 units, our average price per unit of purchase is under $30,000 a unit. I’ll bet you the average MFI is probably under 30 percent.

91视频: So you see taking a private-sector approach to affordable housing as the new model?
Gilbert: It’s a model. I don’t pretend that it solves every problem. This is not a one-size-fits-all deal.
If the primary mechanism for affordable housing is to build new with the delivery mechanism of bonds and tax credits at $200,000 a unit, you will never even start to get your arms around it, let alone solve it.
The existing delivery system for most groups is development fee-oriented. You have to compete with the private sector to buy land, you have to finance it, get an architect, the cost per unit goes up, and most of the new affordable housing that gets built is for around 60 percent median family income. Why? Because that’s the lowest you can go for the amount you paid to build the housing.

91视频: So it comes down to return on investment.
Gilbert: There is no return on investment other than a development fee for the developer and a tax credit that goes to the investor and the bankers that make the loans and the underwriters. It makes sense to buy existing at $30,000 a unit. You rehab in six months. If you buy it right, you may not even need subsidy.

91视频: What are the disadvantages of buying existing buildings?
Gilbert: It’s not new. The useful life isn’t as long. Seismically, there are code issues. Hopefully, they’re nice, pretty buildings. The existing building may be charming, maybe not. Maybe it’s just your pure, vanilla, garden court apartment that’s not in great condition. You may rehab it, but it’s never going to be a new building.

91视频: What are your frustrations with getting affordable housing built?
Gilbert: Knowing that the model works, particularly in Portland. The motivation is there, the model is there, the resources are there, but land is a challenge. Process is frustration, whether it’s entitlement, permitting. That can be downright frustrating. It’s costing us money on land holding costs.

91视频: What do you think about the PDC’s 30 percent tax increment financing set-aside for affordable housing in urban renewal areas?
Gilbert: The TIF set-aside, in theory, I’m a supporter of. I know it was well-intentioned. But I testified to PDC and City Council. I said, don’t take a one-size-fits-all approach because Lents is not the same as the River District. I would argue that in the River District, South Waterfront, when the tipping point had been reached, where the private sector saw that it was worth their risk capital to get a return to do affordable housing, it was going. They were rocking and rolling.
The TIF set-aside could be wonderful. Lents needs jobs. Gateway needs infrastructure. My argument to City Council and to PDC was, let’s do the TIF set-aside but look at each district individually, look at each of their needs and make it flexible.

91视频: Is there an unhealthy housing climate here in Portland?
Gilbert: That’s a broad, general statement. When the rest of the country is struggling mightily in our housing market, we still have a relatively good housing market here. Having said that, people on the lower edges of middle class and below are leaving Portland.
Incomes since the 1970s haven’t been close to keeping pace with escalating housing prices. Part of that is manmade – our urban growth boundary. I personally support the UGB. It’s a tremendous planning tool, and frankly everyone in the real estate business, they owe some of every dollar they make to the UGB. But it comes at a price. The price of land has everything to do with the UGB.
My business is largely perception, and if the perception is limited quantity, it creates a land-rush mentality. That is what we had in this community, and it’s not going away any time soon. It’s supply, demand and perception, and that ain’t going to change.

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To build condos or apartments, that is the question Portland developers have pondered as market forces have shifted in the last two years from a flurry of condominium conversions to a lack of rental units in the central city.
And Portland’s showed some indicators that the condo craze is fading.
In the last couple of years, condominiums sold out before they were even built. In April 2006, almost half of the units at the new Irving Street Towers at 2109 N.W. Irving St. sold on the first day of sales. Developers have seen that sales pace slow considerably, especially for condo towers slated to come online in the next few months. The Westerly, a 104-unit, 14-story condominium tower in Northwest Portland that will open later this year, is just 40 percent sold.
“The market has slowed a little bit for us,” the Westerly’s developer, Jack Onder, said.
But apartments are leasing “like gangbusters” at The Harrison, a three-building condominium conversion and apartment redevelopment, said Reed Kirk, sales manager for the development.
Unico Properties and architectural firm GGLO, both of Seattle, late last month received permits to build a $70 million, 16-story apartment tower, The Lovejoy, along with a Safeway store next door, between 12th and 14th avenues and Marshall and Lovejoy streets in the Pearl District.
Unico decided more than two years ago to build rental units rather than condos, according to Greg Van Patten, Unico’s manager of multifamily investment.
Other Portland developers have waffled on condos versus apartments. Notably, Opus Northwest and John Carroll, developers of the West End’s Ladd Tower, switched their plan to apartments from condominiums as the market changed.
“We wanted to be ahead of the curve in terms of rental projects at the time when just about all the development activity were condos,” Van Patten said. “We saw it coming that (apartments) would be needed.”
By being one of Portland’s first developers of new apartment buildings in the last half-decade, Unico could set a standard for rental rates. The average monthly rent will be around $1,700 per month for the 231 apartments that range from 400 to 1,100 square feet, Van Patten said.
Over at the redeveloped Harrison, one-bedroom apartments are renting for between $1,100 and $1,300 per month, Kirk said.
“The common perception is that $1,700 a month is, ‘Oh my gosh, why would you do that?’” Van Patten said. “But I went through the calculation and if you take a similarly sized condo unit and take what you’d pay for it, along with principal interest, (homeowner association) dues, monthly housing costs, it’s quite a bit more than that for the same size unit.”
High rents are also a product of high land and construction costs coupled with no public incentives, Van Patten said.
In October 2005, City Council changed the guidelines for Portland’s New Multiple Unit Housing Property Tax Exemption, which had offered tax breaks to developers of new projects. The tweak meant only 100 percent affordable housing developments would be eligible for the tax break.
Trammell Crow, developer of the Alexan project in South Waterfront, was the first to lose out on the expected tax exemption, and Unico, with the Lovejoy project, followed, Van Patten said.
“We started on the assumption that it would qualify for the exemption,” he said. “When that went away, it forced us to rethink the whole project … so rents are higher.”
The apartment market is leveling out, Gary Winkler, a multifamily broker at commercial real estate firm Colliers International, said.
So many condo conversions took place in the last few years, he said, the market started weighing too heavily on one side.
“It was destabilized to the point that (condos) are staying on the market much longer; projects are not selling out,” he said. “The obvious thing to do is move over to apartments.”
The good news for developers re-entering the world of apartments is that financial institutions are following the changing tide too.
It’s more difficult now to get institutional funding for condominium developments, Winkler said, because of the condo market slowdown. Investors and banks are more willing to give money to developers building apartments, which they predict have a better chance of returning on investment, he said.

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Art DeMuro is tired of people asking him what’s going on with Portland’s vacant U.S. Custom House, especially because he was passed over to redevelop it nearly two years ago.
DeMuro’s Venerable Properties is Portland’s premier renovator of historic buildings, but the company lost out in a bid to rehab the 100,000-square-foot building back in 2005.
DeMuro was one of two finalists picked by the U.S. General Services Administration, the government agency that owns the Custom House at 220 N.W. Eighth Ave., after the GSA issued a request for proposals to redevelop the property.
Instead, the GSA picked The Pochter Group of Chicago to breathe new life into the 106-year-old property that was the first federal building in Portland. The GSA and the Pochter Group began negotiating an 80-year lease agreement, under which the company would turn the building into an 82-room boutique hotel operated by Dallas-based Wyndham Hotels & Resorts.
The Pochter Group has never developed a property in Portland.
Two years later, the building is still vacant, the lease remains unsigned, and The Pochter Group’s owner, Keith Pochter, is keeping a tight lip about why nothing’s happened.
“The situation we have is the same situation we have had for some time,” Pochter said. “We’re still operating under a confidentiality agreement with the GSA, and it’s up to them to decide what commentary they want to make in regards to our negotiations.”
Although Pochter said “nothing’s changed with our plan,” the GSA’s Web site shows Pochter working with a different hotelier than he had lined up in 2005.
Plans for the Custom House have been stalled because Wyndham backed out of the hotel deal, according to Bill Lesh, a spokesman at the GSA’s Auburn, Wash., office.
According to the GSA’s Web site, Pochter is now partnered with Marcus Hotels & Resorts of Milwaukee.
“They had to look for new hotel partners,” Lesh said. “They had one that fell through, and when that happens, GSA has to start at square one to do due diligence.”
A new lease between GSA and Pochter should be signed within the next 60 to 90 days, Lesh said.
Pochter made news last year for his involvement with a Wilmette, Ill., development in which he and other partners broke ground on a site without gaining proper remediation permits. The site, which was contaminated with three fuel tanks, eventually was cleaned up after Pochter hired removal contractor R.W. Collins of Chicago.
“He was fine (to work with),” Dan Teague, a principal at R.W. Collins, said. “It was a small project, so I only talked to him about the job on-site. He seemed pleasant enough and to the point.”
The situation doesn’t sit well with DeMuro.
“I would like someone from GSA to explain why there is a very significant historic resource that has now been vacant for two-plus years,” he said. “It’s shocking. We were in competition and had a specific proposal and concrete time frame. The primary tenants we had lined up ended up relocating to other Old Town spots.”
Venerable had planned to house its own office, along with 30,000 square feet of classroom space for the University of Oregon, in the Custom House. The university is now slated to take up 100,000 square feet at the White Stag building, which Venerable is rehabbing in Old Town/Chinatown.
Venerable also had a commitment from a restaurant for the portion of the building facing the courtyard, along with the now-defunct Zimmerman Community Center, and the Contemporary Crafts Museum, which instead will open July 22 at 724 N.W. Davis St. as the Museum of Contemporary Craft.
“As a preservationist, you’re always concerned that there’s not active redevelopment going on,” he said. “And I’m concerned about the process, that once they’ve awarded a building to somebody and the redevelopment program isn’t being implemented, there’s an obligation to be proactive and pursue another route.”
DeMuro said the GSA told him it would keep in touch with Venerable in case the first deal didn’t go through. But DeMuro said he hasn’t heard from the agency.
“I think we deserve the opportunity to talk to them about what’s going on there,” he said.

Retraction
A July 5 Page 1 article, “Custom House vacant 2 years after rehab deal,” by Kennedy Smith, reported inaccurately that The Pochter Group of Chicago, chosen by the federal Government Services Administration to renovate the U.S. Custom House in Portland, previously had broken ground on a site in Wilmette, Ill., without gaining proper remediation permits.
In fact, the village of Wilmette issued The Pochter Group a demolition permit last spring, according to Lisa Roberts, director of community development at the village of Wilmette. During demolition, the developers discovered underground tanks and filed a remediation application with the Office of the Illinois State Fire Marshal, Roberts said. The permits were approved in March 2006, according to Jim Coffey, engineering technician at the fire marshal’s office, and the tanks were removed later that month by Chicago-based R.W. Collins.
The Pochter Group has applied with the village of Wilmette for building permits, which are still being considered, Roberts said.
The article also reported that Pochter Group owner Keith Pochter had never developed property in Portland. This is true, but the article neglected to report Pochter had worked in Oregon before, having renovated in 1997 the former First National Bank, a 31,000-square-foot historic building. Pochter sold the building in 2003.

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Along Southwest Capitol Highway, a four-lane throughway that connects Portland to Beaverton, there’s a small strip of businesses including Starbucks, Wild Oats and a McMenamins restaurant. Designated a town center by regional government Metro, the strip is what most people associate with the Hillsdale neighborhood, last stop on the way to Beaverton. But it’s hardly a stop at all.
Just before the road splits into Capitol Highway and Beaverton-Hillsdale Highway at 18th Avenue, the neighborhood’s first mixed-use project is under way. But most other development in the neighborhood is single-family infill.
The development is “the biggest thing going on in Hillsdale right now,” said Leonard Gard, a land-use specialist at Southwest Neighborhoods Inc., a consortium of 16 Southwest Portland neighborhood associations and three business associations.
The Watershed at Hillsdale, developed by the nonprofit Community Partners for Affordable Housing Inc., will contain 51 affordable senior housing units, a 1,500-square-foot community center and 3,300 square feet of commercial space.
But the rest of outer southwest’s development activity comprises single-family houses, row houses and condominium conversions, said Jeff Parker, a Realtor who markets Southwest Portland properties.
As far as mixed-use development goes, Parker said, the Watershed at Hillsdale stands alone.
Permit records from 1995 to 2004 show Portland’s west side comprising about 26 percent of the city’s single-family units and 5 percent of its multifamily units, according to the Portland Bureau of Planning.
The majority of the city’s large, multifamily projects have been built in Northwest, with the Southwest primarily housing smaller infill projects, the bureau said.
Because the Watershed at Hillsdale is the first development of its kind in Southwest, it’s hard to tell whether it will spur more mixed-use development, Gard said, especially when all the other development activity is single-family residential.
“Hillsdale has the best chances for row houses, so that’s what we’re seeing out here,” he said.
The major roadblock to mixed-use development, Gard said, is a zoning constraint that doesn’t allow for more than one use on most parcels.
In 2001, City Council adopted the Southwest Community Plan, which aimed to change some of the restrictions in order to rezone certain residential areas to commercial mixed-use. The Watershed at Hillsdale is the first mixed-use development since the plan’s adoption.
The plan encourages transit- and pedestrian-oriented mixed-use projects and a range of housing types, including affordable housing. But most of Southwest Portland is zoned for single-family medium- and low-density development.
Although most neighbors support more intense development with a mix of commercial and residential space, Gard said, Hillsdale is playing catch-up with the rest of Portland.
Gard said he’s holding out to see the kind of development outlined in the 2001 plan, “more intense development along the thoroughfares like Barbur, and some kind of project that would bring a work force with it.”
Land in Southwest is scarce for mixed-use projects, Gard said. Community Partners for Affordable Housing has applied to develop a project on Multnomah Boulevard that would comprise a mix of residential types but no commercial space.
The only other foreseeable opportunity for a mixed-use project in Southwest Portland is the Burlingame Fred Meyer store, east of the Watershed at Hillsdale, at 7555 S.W. Barbur Blvd. Fred Meyer is exploring redeveloping the store into a supermarket with housing attached, Melinda Merrill, a spokeswoman for the company, said.
“The community very much wants housing in there, so we’re working on finding a developer and figuring out how to do that,” she said.
Architect Richard Brown, whose firm rehabilitated an old auto garage into the Pacific Artists Dance Center on Capitol Highway, is eyeing a lot across from the Watershed at Hillsdale for retail use.
“We looked at mixed-use but it quickly became too complicated,” he said. “There was not enough parking to support it.” But, Brown said, mixed-use development in the area is “just a matter of time.”

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City Council unanimously approved a zone change Wednesday, turning a two-acre parcel in Northeast Portland from high-density residential to mixed-use commercial. The zone change makes it possible for developers to start the second phase of an affordable live/work artist community.
Developers Brad Malsin of Beam Development and Ted Gilbert of Portland Affordable Housing Trust are renovating the former Baptist Manor retirement community at 900 N.E. 81st Ave. into what will be called Milepost 5, a two-building complex of affordable for-sale and for-rent units with ground-floor commercial space.
The zoning change supports Portland’s comprehensive plan goals, Nan Stark of the Portland Bureau of Planning said. The change to an urban commercial designation “was found to be equally or more supportive of the comprehensive plan as a whole than the existing zoning,” she said.
Portland’s comprehensive plan guides future growth and development in the city.
The zone change was needed, Gilbert said, to allow for a gallery on the ground floor where artists can show and sell their works. The project will also house a business development center for residents.
“Portland is Portland in large part because of its support of the arts and artists that are coming here and have been here,” Malsin said. “I see this as a fundamental need to support Portland in the arts.”
Mayor Tom Potter, whose mother once lived at Baptist Manor, said “if she were alive, she’d be very happy you’re building a place for artists to live.”
Portland Affordable Housing Trust and Beam Development bought Baptist Manor for $2.2 million earlier this year.
Milepost 5’s rental units will be around 250 to 300 square feet and go for $200 to $300 per month. Fifty-four of the 123 units will be for sale, starting around $99,000.
The zone change limits the development to 123 residential units and 9,800 square feet of nonresidential uses. If the developers were to increase the project’s scope, Stark said, they would be subject to a Type II land-use review through the Portland Department of Transportation to prove surrounding streets could handle any increased traffic.

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City Commissioner Sam Adams became president of City Council on Wednesday during its regular afternoon meeting.
The title rotates every six months and is passed on numerically. Adams inherited the presidency from Commissioner Randy Leonard, who is in the fourth slot. Adams is commissioner No. 1. In six months, Commissioner Erik Sten will become president, then Commissioner Dan Saltzman.
The president’s role is to conduct City Council meetings when the mayor is not present.
Leonard was absent Wednesday, vacationing.

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The Portland Planning Commission on Tuesday voted unanimously to allow public money to pay for a not-yet-built convention center hotel, pending City Council approval.
The commission passed the 16th amendment to the Oregon Convention Center urban renewal plan, clarifying that lodging- and tourism-related public buildings be eligible to receive public money.
The Oregon Convention Center plan, drafted in 1989, identified a convention center hotel as its top goal for increasing economic vitality in the Lloyd District. Eighteen years later, the convention center is still without a hotel.
The amendment, if approved by City Council, would allow regional government Metro and the Portland Development Commission to use public money, including tax-increment financing, to close a $70 million to $90 million gap the PDC said is present in a private financing structure. The estimated cost to build the hotel stands at $150 million.
Planning Commissioner Catherine Ciarlo said she doubted the PDC and Metro could come up with as much as $90 million in public funds to cover the gap.
But the PDC’s Fred Warren said a public finance model would be “a completely different formula.”
“To be honest, we need to make sure that all the assumptions we made in our (public) model are good, sound assumptions,” he said. “We need to stress-test it.”
David Woolson, CEO of the Metropolitan Exposition Recreation Commission, backed Warren, saying the public financing structure “isn’t about how to plug a $70 million hole; it’s looking at the project as a whole to finance it from the beginning.”
Both admitted, however, that the agencies would be starting at square one figuring out how to raise the money to build the hotel.
The Oregon Convention Center’s Headquarters Hotel, which would be developed by Ashforth Pacific and Garfield Traub and designed by Zimmer Gunsul Frasca, would be privately run but publicly owned, Debbie Bischoff of the Portland Bureau of Planning said.
The Portland hotel market is strong, Warren said, citing a 75 percent occupancy rate. The Headquarters Hotel would bring 600 rooms and 40,000 square feet of meeting space to the Oregon Convention Center.
The hotel, Warren said, would bring in 17 new conventions per year based on analysis by national hotel consulting firm PKF Consulting.
Ray Leary, developer of Vanport Square at Northeast Martin Luther King Jr. Boulevard between Alberta and Emerson streets, came out in support of the amendment, saying it would attract private development dollars farther north where the Oregon Convention Center area bleeds into the neighborhoods surrounding Martin Luther King Jr. Boulevard.
“I’m sick and tired of us in Portland accepting a second-tier status when we are one of the major cities in this country,” he said. “It won’t make much sense for the next great city in America to not have a Headquarters Hotel.”
The Headquarters Hotel has been under Metro’s control since the PDC handed over the project’s reins in March.
If the financing doesn’t pan out, Metro will look at alternatives, such as building a smaller hotel, providing incentives for attracting convention business, or tweaking the Oregon Convention Center’s mission.

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