B67 will be a landmark for the city of Portland.

“The responsibility to do it right is tremendous,” said Adrian Boly, vice president of development for Guardian Real Estate Services. “You don’t get a lot of opportunities to add something to the cityscape that will define it.”

In the coming weeks, Andersen Construction will begin erecting the first floors of B67: a 21-story glassy tower in Portland’s exact geographical center. When finished, the 284-unit building will be one of the most visible landmarks in the city; however, as multifamily competition increases, one question remains: Will the development be able to generate the income necessary to justify the elevated costs of high-rise construction?

Humble beginnings

When developer Jeff Pickhardt first set his sights on the Burnside bridgehead, he wasn’t quite sure what to make of it. Not many people were.

“I think at that point in time people were still scratching their heads and wondering if it was an opportunity or not,” said Pickhardt, principal of Hood River-based Key Development, which is co-managing development of B67 with Guardian.

That was 2011, and after two years of searching for development sites in Portland, Pickhardt was considering whether to respond to an open request from the city to redevelop one of its long-vacant parcels. In addition to possessing a severe slope and irregular position next to the Burnside Bridge, the site was where a massive mixed-use development failed in 2008. The city rallied by refocusing on smaller, bite-size projects.

As such, Pickhardt’s original proposal for B67 considered a small, mid-rise apartment building on just a portion of Block 67. The concept was soon dwarfed, however, by the site’s location and high-density zoning. By the time Pickhardt’s design team, Skylab Architecture, presented plans to the Portland Design Commission, the project had morphed into a full-blown tower.

“We want the tower to take on the qualities of the sky as much as possible,” Skylab principal architect Jeff Kovel said during that April 2013 meeting.

Commissioners were intrigued, but challenged by the ambitious concept. Then it was refined repeatedly over the following year. Renderings now feature an angular tower that bleeds into the sky as it climbs over a landscaped, mountain-shaped podium.

Around the same time as that first design commission hearing, Pickhardt was also consulting Guardian about a mid-rise apartment project in Hood River. That development never got off the ground, but as the two companies collaborated, their attention turned increasingly to Block 67 and a potential partnership.

Key Development would bring its experience working in public-private partnerships; Guardian, its expertise managing roughly 13,000 units across five states. Guardian brought another critical component to the union: the ability to leverage large sums of institutional capital.

“The determination was made that this could be an iconic project, and a very large project – something that could redefine the skyline,” Boly said.

Market window of opportunity

Last spring, Guardian launched a capital campaign to finance what by then was an $85 million project.

Portland’s multifamily market had all of the right ingredients for investors: a budding population, job growth, rent growth, and historically low vacancy levels. Accordingly, more than 7,000 new apartment units are expected to come online in 2015 and again in 2016 – more than double the metro area’s average annual absorption rate, according to Johnson Economics.

Jerry Johnson, a principal at Johnson Economics, doesn’t think the market will have any trouble absorbing those units. But if the pace continues into 2017 and beyond, he said, occupancies could start to decline. That will raise the stakes for landlords.

“Cycles get mature, and then they get a little … ripe, and then a little over-ripe,” said Johnson, who was contracted by the development team to analyze whether B67 would work financially. “I just think this is a market where people really have to be on their game. If you’re entering now, you have to have a good product niche, and you have to know where you stack up against your competition because you will have competition.”

The challenge for B67 will be its Pearl-District-level prices in an unproven location in the Central Eastside. Most units will be studios or one-bedroom apartments in 10 different floor plans; each will rent for between $1,200 and $2,000 a month. Additionally, 20 percent of the building will be reserved for individuals making 60 percent of the area’s median family income or less.

Fortunately for B67, Johnson said some mid-rise apartments in the Central Eastside are already obtaining rents between $2.20 and $2.40 per square foot. Not much more is needed to justify high-rise construction, and Johnson is bullish on B67.

“The Central Eastside is getting great rents right now,” he said. “For a lot of the younger wealthy, the east side is the new hip place to be; the Pearl is where your dentist lives – I was told that by a developer once.”

Banking on a solid location

B67 is backed by a 60 percent senior loan from the Bank of the Ozarks, a 25 percent mezzanine loan from Cornerstone Real Estate Advisers, and roughly 15 percent in equity investments from high-net-worth individuals. Scott Magoffin, an associate at Cornerstone, said part of the appeal of the Central Eastside is its gritty, industrial vibe compared to the “glitz and glam” of the Pearl.

“We all could be wrong that this is a desirable location at those rent levels, but access to the downtown area is as good as it gets without being down there,” Magoffin said. “… I feel I’d rather be the first and really only tower – Class A tower – on the east side than the 10th or 11th in the Pearl.”

The 21-story Hassalo on Eighth development will technically have that distinction when it’s completed later this year, but Magoffin thinks the location and amenities offered at B67 will give it an edge. In addition to on-site retailers and restaurateurs (such as a new distillery), B67 will have luxuries like a pet exercise area and a full-service day spa.

Pickhardt also sees those amenities playing a big role in the building’s performance, despite market demand.

“There is clearly a demand for (the project),” he said. “Nevertheless, our approach to this project has been one where we assume that that may not be the case. And if that’s not the case and there is an oversupply of apartments, then we would insist that the product we put out there is as good as it can possibly be so we’re positioned well to compete.”

B67’s best amenity, arguably, is its unobstructed views of the city. Before construction started, Boly said that one of the contractors flew a small drone 250 feet above the site to give the team an idea of what to expect from the roofline. The results were unparalleled.

“There won’t be anything like it,” Boly said.

The post The Central Eastside’s skyscraper appeared first on Daily Journal of Commerce.

When Dallas-based Trinsic Residential Group set its sights on Portland, it had hoped to replicate a 159-unit apartment project it was developing on the far side of Puget Sound. That $41 million development, now under construction, will have underground parking, high-end amenities and 20 percent affordable units. The Portland project will have those components too – except the affordable housing.

That’s because unlike a popular program in Seattle that rewards developers who include affordable housing in their market-rate projects with tax exemptions, a similar program in Portland effectively penalizes them, said Allison Finn, a development associate at Trinsic Residential. Portland city leaders are searching for new incentives to encourage inclusion of affordable housing in developments, but industry professionals say the first step should be to fix the disconnect between the existing tax exemption program and the free market.

“It’s too bad that the Portland program is what it is today just because there is a big multifamily housing boom going on and there are a lot of neat, cool, urban infill projects going on that could potentially have an affordable component,” Finn said. “But I just don’t see that same participation in Portland that I do here in Seattle … I hope they can craft or morph the program into something that’s more attractive to developers, and hopefully encourages more affordable housing in Portland in the close-in neighborhoods.”

Compare and contrast

Seattle implemented its Multifamily Tax Exemption (MFTE) program in 1998. It has since contributed to development of 148 projects featuring 4,477 affordable units in 33 targeted neighborhoods. Seventy-two of those projects are complete; 76 are in the pipeline.

In exchange for rent-restricting 20 percent of their units, developers in the MFTE program are excused from paying property taxes on the value of residential improvements for 12 years. Last year was the MFTE program’s busiest to date, as staffers enrolled approximately 40 multifamily projects.

By comparison, the Portland Housing Bureau approved just three: a 61-unit affordable apartment project in Gateway; a 142-unit project with 123 affordable units in the Pearl District; and a 196-unit project with 39 affordable units in downtown.

That’s largely because Seattle’s program has no financial limit on the amount of foregone revenue it can grant developers, while Portland’s Multiple-Unit Limited Tax Exemption (MULTE) program has an annual cap of $1 million. But that’s not the cap that bothers Finn.

“Basically, if you went over their performance cap then they could essentially come back and require a claw-back of taxes or require you to designate more affordable units,”

Finn said. “We didn’t understand that. From our perspective it seemed we were getting punished in a way for having the affordable component … that was a big red flag for us.”

Finn has other qualms. Not only does the MULTE program not allow developers to opt out of the program (MFTE does), she said it also requires the PHB’s approval prior to changes in ownership (MFTE doesn’t). That adds significant risk to a property from an investment standpoint.

Those performance constraints have pushed away other developers too. Killian Pacific considered seeking MULTE aid for its 240-unit, mixed-use Goat Blocks project, but Noel Johnson, the company’s vice president, said it didn’t make sense.

“We looked into it and we can’t figure out how it would be worth it,” he said. “The program is supposed to be a carrot to induce developers to actually want to do it, but we couldn’t figure out how it would ever actually make sense … It’s more risk than it is reward; more headache than help.”

Johnson thinks that’s unfortunate because thousands of units are under construction throughout Portland, and thousands more are on the way.

“If Portland’s program was substantially similar to Seattle’s,” he said, “I think you’d get a significant amount of affordable housing being delivered by the free market.”

Look again

In 2012, following a policy review by the “Big Look” committee of regional stakeholders, the PHB ratcheted up its requirements for tax exemptions.

In addition to setting the $1 million cap on annual foregone revenue, the committee made the application process competitive. Suddenly things like minority participation and green building techniques were being weighed on the same scale as affordability. The idea was to get more bang for the city’s limited bucks.

Jill Sherman, a vice president at Gerding Edlen, was on that committee and said those requirements were put into place as a compromise to keep the MULTE program from disappearing entirely. She said that following the recession, county governments and school districts – though supportive of affordable housing goals – were reluctant to give up any more of their dwindling resources.

“They’d been through so much pain in terms of cutting really critical programs, so the idea of losing any additional revenue (was hard),” Sherman said. “The cap was a compromise so they could feel comfortable supporting the program at all.”

Gerding Edlen has used Seattle’s MFTE program numerous times, and Sherman thinks a similar one in Portland would be beneficial. But she would rather have a hobbled program than none at all.

“In an ideal world it would be like the Seattle program, but on the other hand if there isn’t the sort of political will because of other funding challenges …” Sherman said, trailing off.

Finn finds Portland’s current process overly ambiguous and subjective, and up until recently she couldn’t apply for a building permit while she waited for the results. The reason harked back to language in the original state statute that essentially said: but for the tax exemptions a building would not get built.

Andrea Matthiessen, neighborhood housing program manager for the PHB, said the bureau has begun to rethink some of those positions.

“The way we look at it now is: the affordability in that property wouldn’t happen ‘but for’ the property tax exemption,” she said. “… There are some other general changes that we are looking at, and they’re all grounded in how to make the tax exemption program more appealing to developers while simultaneously ensuring that the city is getting an acceptable return on our investment in foregone revenue, because it’s not just our foregone revenue. It’s foregone revenue we share with the school districts and the county.”

Portland City Council recently removed the building permit requirement from its application process, and Matthiessen said the PHB is considering eliminating others as well – such as the market-rate performance cap. That stems back to another broken line of thought that theorizes: but for the tax exemption, the development would not be profitable.

Finn thinks those changes could have a huge impact on Portland’s housing landscape.

“In Seattle it’s very common – all big multifamily developers know the MFTE program very well and most of them are using it,” she said. “… I think developers are very excited and happy to be a part of the (Seattle) program because it does work with our business model, and also provides a public benefit … It’s easier and more cost-effective to have private developers provide multifamily, affordable, close-in housing when they’re already building these big, beautiful projects. So it just makes sense that there’s a public-private partnership that takes advantage of that growth.”

The post Developers not biting city’s lure appeared first on Daily Journal of Commerce.

Portland has a deficit of affordable housing, and Portland City Commissioner Dan Saltzman doesn’t expect it to be filled naturally.

“The indicators are that market saturation alone is not going to eliminate that demand, which I think is what a lot of people are banking on,” he said. “When you consider the tremendous number of people moving to this region, that puts a lot of pressure on the existing housing. We have a tremendous multifamily construction boom under way and it’s my hope that we can capture a good fair share of that to be affordable.”

In early May, city councilors approved Saltzman’s plan to create the Affordable Housing Incentive Zoning program, which rewards developers with density bonuses in exchange for providing affordable or workforce housing.

The Portland region has a deficit of approximately 20,000 affordable housing units (for people making 60 percent of the area’s median family income, or $29,160 annually), according to John Miller, executive director of the Oregon Opportunity Network. He said Greater Portland has a surplus of approximately 20,000 workforce housing units, but they’re not near the city center.

Saltzman’s program offers floor-area-ratio bonuses in exchange for inclusion of a minimum amount of rent-restricted units. Portland currently has 18 different FAR bonuses, but

Saltzman plans to weed those down to just a few. He’s also proposing a payment-in-lieu option that would allow developers to buy that same bonus.

“I think it’s an important societal goal,” Saltzman said of integrating affordable units in market-rate ones. “We need to have people from all walks of life getting along, and that happens when they live in close proximity to each other.”

The post A new city program appeared first on Daily Journal of Commerce.

Public dollars for affordable housing are hard to come by.

“When we first became a bureau back in 2010, we had roughly $60 million in development funds, and it has been dwindling from there,” said Javier Mena, assistant director of the Portland Housing Bureau.

This year, the PHB will have just $16 million to offer. To supplement that, Mayor Charlie Hales has proposed redrawing the city’s urban renewal areas. That could potentially provide many more millions of dollars in the coming years.

Tax exemptions on new affordable housing projects, by contrast, provide developers a discount on fees the city has yet to collect. When an exemption expires, the taxes are often exponentially greater than what they would have been without development, but critics contend that such a system allows property owners to shirk fiscal obligations.

In the mid-2000s, Portland offered a tax exemption to multifamily developers to encourage construction of housing in the central city, but it was scrapped over such concerns.

The post Dwindling funds and exemptions appeared first on Daily Journal of Commerce.

Every year, Americans throw away enough steel to rebuild Manhattan, enough aluminum to rebuild the nation’s entire commercial air fleet four times over, and enough wood to heat 50 million homes for 20 years, according to Edward Humes in his 2012 book “Garbology: Our Dirty Love Affair With Trash.”

Locally, officials at city and regional levels say developers and builders aren’t recycling half as much as they think they are. Portland requires that at least 75 percent of materials from construction projects valued over $50,000 be recycled. But that isn’t preventing a lot of items from landing in landfills.

“The big, shocking component is … around 20 to 25 percent of our landfill material is related to construction and demolition activities,” said Shawn Wood, construction waste specialist for the Bureau of Planning and Sustainability. “It’s even more in some areas. In some areas it’s as much as half related to it.”

Wood said people’s false notions about sustainability are helping to build that mountain of waste. For instance, Portland’s 75 percent requirement allows builders to dump various materials into the same bin. Some people might think that when all project materials go into one recycling bin, all are being recycled – but they aren’t.

After being twisted, compacted and crunched into recycle bins, those “recyclables” go to a material recovery facility – or MRF – and are dumped onto a conveyer belt and sorted by line workers. By the time they get through the jumbled mess, Wood said, they’re typically able to save only about 25 to 40 percent. The rest goes to a landfill.

Some MRFs claim to recycle 80 percent of the materials they receive, but Wood said that’s because they’re counting the residual stuff pulverized in the demolition and delivery process, and used instead of soil for landfill cover. Omit that “alternative daily cover” material and their recycling rates are closer to 25 to 40 percent.

“Recycling is almost at the bottom of the waste hierarchy pyramid,” Wood said. “It’s ‘reduce, re-use, recycle,’ and recycle is at the end of the list for a reason. Other than it going straight to the landfill, it’s the least desirable outcome.”

That is unless contractors separate the waste by material, in which case the amount recycled jumps to 95 to 100 percent. An even more sustainable option is deconstruction – methodically dismantling buildings in the reverse order they were built, and then reusing the materials.

DeConstruction Services – a contracting arm of the ReBuilding Center on North Mississippi Avenue – can typically salvage 85 percent of a building’s major components for reuse. The rest gets recycled.

“Someone was quoted from a construction company saying, ‘That’s great if you want to pay 15 times the amount (of demolition),’ ” ReBuilding Center Executive Director Shane Endicott said. “But we (cost) barely more than the demo.”

Deconstruction can actually be more cost-effective than demolition in some situations, he said. As a general rule, deconstruction of an average house costs about 15 percent more, but that’s not taking into account for donating building materials.

“When you take in tax subsidies, we have clients that come out way on top,” Endicott said.

For instance, DeConstruction Services once gutted a Northwest Portland house for $5,000. The value of the resulting tax write-off was more than $20,000.

Another benefit of deconstruction, Endicott said, is that because of overhead-related costs, it can support eight jobs while demolition may rely on one excavator. He believes this presents an opportunity for excavation companies to grow, and said he would speak with anybody interested to learn more.

Deconstruction was actually commonplace in the first half of the 20th century, but fell out of favor in the 1970s, according to Endicott. He said that’s a shame because there’s a huge market for used building materials. Today, the ReBuilding Center moves an average of eight tons of materials per day. People from all over the world buy its materials; a few weeks ago, a man from Japan purchased 150 light fixtures.

In the past, companies paid the ReBuilding Center to take their large timber beams. Now the nonprofit can’t buy them because they’re in such high demand.

“By simply changing our relationship with (waste) and getting it into reuse, (the ReBuilding Center has) been able to change that same material into an asset that’s benefited the community – socially, economically and throughout the whole spectrum of sustainability,” he said.

The ReBuilding Center sells those used materials for 25 cents on the dollar, and since 1998 has saved customers approximately $75 million, according to Endicott. The self-sustaining nonprofit has totaled approximately $25 million in sales in that time, providing full benefits to roughly 35 employees off of what the community formerly was paying to throw away, he said.

Some ReBuilding Center employees have left to create their own for-profit models, and Endicott said that if others want to do the same he’ll gladly share his business plan.

Other than tax subsidies or resale of materials, however, local municipalities don’t have a lot of carrots they can dangle in front of developers to convince them to choose deconstruction, Wood said. But there is one more benefit. As demolition activity grows in Portland, so does neighborhood opposition. Wood said deconstruction can be a powerful olive branch.

“It’s like capital punishment – we care how things die,” he said. “Standing in front of 20 rifles is different than injection, and it’s kind of the same thing with deconstruction.”

Demolition and waste

According to data compiled by Shawn Wood, construction waste specialist for the Portland Bureau of Planning and Sustainability, the city in 2013 received 273 applications for single-family home demolitions. That is up from 209 in 2012 and just 140 in 2011. Through June 3, the city received 135 applications, so this year’s total is on track to exceed 300 (not counting remodels, which Wood says account for 85 percent of construction waste).

An average Portland home is approximately 1,119 square feet, and every square foot produces close to 115 pounds of waste, according to Wood. So, if all 273 of those demolitions planned last year were to move forward, they would produce roughly 17,565 tons of waste – with at least 10,539 tons going into landfills (assuming a 40 percent recycle rate).

The post Advocating for reduction of construction waste appeared first on Daily Journal of Commerce.

A $53 million redevelopment effort has refreshed a formerly blighted public housing facility in Southwest Portland.

The 60-unit Hillsdale Terrace affordable housing complex at Southwest Capitol Highway and 26th Avenue was built in 1968. It had become significantly depressed because of many building defects over the years.

Home Forward in 2012 looked to rejuvenate the property, and landed an $18.5 million HOPE VI grant from the U.S. Department of Housing and Urban Development. The complex, renamed Stephens Creek Crossing, now features 122 apartments, two community gardens, playgrounds, and an “opportunity center” with meeting, classroom and kitchen space for educational purposes.

Once plagued by moisture problems, the entire property now manages 100 percent of its stormwater on-site, and features other modern sustainable features.

According to Home Forward, approximately one-third of the 49 previous Hillsdale Terrace households have returned to the property. Other incoming residents will come from a waiting list of nearly 3,000 households.

The redevelopment team, in conjunction with Habitat for Humanity, also created seven single-family homes for first-time homebuyers. They are near a children’s center at the corner of Southwest Capitol Highway and 26th Avenue.

The project’s general contractor was R&H Colas – a joint partnership between R&H Construction and Colas Construction; the architect was MWA Architects.

The post New day dawns for long-blighted housing complex appeared first on Daily Journal of Commerce.

The 95-year-old building at 1727 N.W. Hoyt St. is a contributing structure in the nationally registered Alphabet Historic District. But in recent years, it has contributed only vacant space.

The problem is two parts zoning, one part structural. After the owners of the 13,000-square-foot building disbanded their law firm and moved out around 2007, the structure sat empty during the recession and lost its grandfathered status for conditional commercial use. Today, the property is zoned for high-density residential use, which would require a costly seismic upgrade.

“We’ve looked at multiple scenarios for developing the property, including renovating and developing next to it,” said Jill Sherman, Gerding Edlen vice president of development. “It’s just not feasible economically and I don’t think it’s a better project.”

Gerding Edlen and the property’s owners are working on plans to redevelop the half-block site on the east side of Northwest 18th Avenue, between Hoyt and Irving streets, as an 82-unit apartment building. But before the $14 million-plus development can move forward, the building at 1727 N.W. Hoyt St. must be demolished – and that promises to be a difficult proposition.

Only once in the city’s history has approval been given to demolish a contributing structure in a historic district – in 2010, for the Kiernan Building, aka the Dirty Duck – and it was controversial. Now, some Northwest Portland residents are rallying to save the Hoyt Street building.

Once again, goals for density and preservation are competing.

“When you put 80 units in a giant building in between these two streets of quaint Victorian homes that have been here for 130 years you’re seriously degrading the character of the street,” said Wendy Chung, a neighbor and a Northwest District Neighborhood Association board member.

Chung said the Hoyt Street building may not be on the National Register of Historic Places, but her 130-year-old home (at 1729 N.W. Irving St.) is, and so are many others on the surrounding block. She bought her house in 2007 for $485,000 with an expectation that those historic designations would be honored.

Chung noted that she and her neighbors are not opposed to development, and cited numerous projects nearby as evidence. She even likes Holst Architecture‘s designs – featuring a distressed brick facade, bay windows and a mansard roof – for Gerding Edlen’s proposed project. She just doesn’t think such a development is appropriate for the site.

“We’re all for development and trying to increase density,” Chung said. “We just think on this particular lot there could be ways to preserve (the building) and meet our density needs.”

Sherman has evaluated those options. She said that the cost of construction would not really justify the expense, and that after development of the surrounding property only a sliver of the contributing structure would remain visible. Nevertheless, she understands neighbors’ concerns; about a year ago she began meeting with them to gather input.

Because lack of parking is a big concern in Northwest Portland, Gerding Edlen is proposing 70 below-grade spaces. It is also hoping to include a substantial amount of two-bedroom units (now in short supply) and workforce housing. Sherman pointed to the same nearby multifamily developments that Chung did as evidence that the building would not be out of context, especially from a geographic perspective.

“It’s all about location and proximity to transportation, the proximity to services and the proximity to jobs,” Sherman said. “Basically, I think of that district as a downtown central city district and generally where I think you want to see – and a lot of our public policy says that’s where we want to have – density of housing.”

Part of the conflict stems from the mixed messages touted by the property. Its zoning encourages high-density development, but the historic district designation bestowed later doesn’t.

Notably, a by the National Trust for Historic Preservation found that some of the most thriving communities are those that contain a high diversity of building ages. But for the Hoyt Street building, its fate will be determined via a Type IV historic resource demolition review – a process that can take up to eight months, and ends with a vote by City Council.

“I think you’re asking a question that even preservationists would disagree on,” said Tim Heron, a senior city planner for the Bureau of Development Services. “It’s very subjective, and that’s why we have a process, and that’s why this will go through a process … We’re going to talk those issues out … When you demolish a resource, it’s irreplaceable. You don’t get it back. That’s the bar.”

Meanwhile, Josh Schweitz, a Kidder Mathews senior vice president who marketed the Hoyt Street building for several years during the recession, lamented that it can no longer accommodate commercial use. He came close to a deal in 2008, but nothing panned out.

Schweitz said that wouldn’t happen today.

“I guarantee I could put my sign up and I could have it under contract within a week just because the market right now is so hot,” he said. “… I wish I had 10 of those types of buildings.”

The post A clash of interests in historic district appeared first on Daily Journal of Commerce.

The Portland Development Commission on Wednesday granted a generous loan modification to Portland Center Stage for refinancing of the Armory Building in the Pearl District, but not before a somewhat heated exchange between one commissioner and the performing arts organization’s artistic director.

The PDC in 2003 issued loans totaling $4.6 million for redevelopment of the 126-year-old Armory Building. The effort spearheaded by Gerding Edlen was intended to create a major cultural attraction in the neighborhood, and the facility now accommodates more than 800 events and 165,000 theatergoers annually.

Portland Center Stage, via the Armory Theater Fund, requested that the PDC extinguish $2 million of the loan amount and let $3.2 million more be refinanced. That did not sit well with Commissioner Charles Wilhoite, a managing director at Willamette Management Associates.

“I’m being asked to forgive $2 million in debt, and restructure $3.2 million in debt over 10 years at zero (percent) interest with no plans for repayment,” he said. “Does that make sense?”

The PDC originally provided $2.6 million as a 10-year loan at 3 percent interest (loan A), and $2 million as a forgivable loan if certain public benefits were achieved (loan B). That condition on loan B was later removed because structural requirements of New Markets Tax Credits – used to finance construction – didn’t allow the loan to be converted into a public investment (aka forgiven).

Those tax credits are nearing their expiration, and the two loans are coming to term. The problem, Portland Center Stage officials reported Wednesday, is that it is currently unable to repay the sum. So, the organization requested a 10-year extension on the balance of Loan A ($3.2 million) at zero percent interest; and, with the New Markets Tax Credits out of the way, a return to the original plan for forgiveness of Loan B.

Wilhoite asked Portland Center Stage’s artistic director, Chris Coleman, repeatedly if the request was an indication that the organization is in financial distress. Coleman waffled and replied that the answer depended on how Wilhoite defined financial distress, and then Wilhoite pushed for a “yes” or “no” answer.

“Am I on trial here?” Coleman retorted. “I didn’t realize I was going to be on trial here.”

Wilhoite apologized for being abrupt, and said he supported Portland Center Stage’s work, but added that he has a responsibility to adequately vet the request. In the end, his main concern came down to language in the resolution stating that “there is currently no plan for how the extended loan A will be repaid at or before maturity.”

Wilhoite said he had never seen such noncommittal language before, and so Commissioner Tom Kelly, president of Neil Kelly Co., proposed amending the resolution to require Portland Center Stage to return before the commission in two years with a plan for repayment.

The resolution passed three to one, with Wilhoite offering a resounding, sing-song, “Naaay.”

The entire meeting can be viewed at: www.youtube.com/watch?v=Z8HRfDl8f5Q.

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A geyser of construction activity is about to erupt at the east end of the Burnside Bridge, and one final development is bubbling to the surface.

Hood River-based Key Development is purchasing from the Portland Development Commission the tiny spit of land (Block 76W) on the west side of the Couch Street couplet, and planning to build a two- to three-story commercial building. The firm already is preparing to break ground in August on a 21-story mixed-use tower on Block 67, due west of Block 76W, and other developers are hot on its heels with projects.

PDC commissioners on Wednesday unanimously approved Key Development’s offer for the 8,414-square-foot sister site. Given its small size, sharp slope and the presence of submerged support structures for the Burnside Bridge, the property was not expected to draw an offer.

“When I looked at this plan I never thought that piece of property would get developed,” PDC Board Chairman and Melvin Mark President Scott Andrews said during the hearing. “It’s got a 20 percent slope (and) it’s holding up Couch Street … God bless Key Development.”

Development of the small site wasn’t initially part of Key Development’s plan, principal Jeff Pickhardt acknowledged, but was instead born out of a need to create a stronger pedestrian connection with the bridge.

Key Development’s original plan was to make that connection via Block 67, but Pickhardt said that fizzled when his team learned that the railing on the Burnside Bridge is historically significant – and therefore untouchable. Then, during a design assistance meeting with the city, team members shifted their attention to the grassy island.

“I have to give credit to Skylab (Architecture) in coming up with the design,” Pickhardt said. “They took it upon themselves to create the first run at the design, and then reintroduced it as part of the larger project.”

The proposed 20,000-square-foot building looks like a miniature version of the nearby tower’s podium structure. A large, glass storefront system, triangular frame and green roof suggest a mountain or steep hillside.

The Block 76W development is estimated to cost $6.4 million; Andersen Construction is Key Development’s general contractor for both that project and Block 67.

The PDC is selling the property to Key Development (via Block 76 LLC) for a July 2013 fair market value of $336,000, but the true price will be the cost to perform “extraordinary” geotechnical work – estimated at $361,000. As the development firm pays for that work, the PDC will reimburse it the purchase price.

Key Development also is required to make a $33,600 earnest payment that will be nonrefundable following a 30-day due diligence period. The deal is scheduled to close within 90 days, and the development firm must begin work within three years or the PDC can buy the property back for the original purchase price. The PDC also would gain a 10 percent interest in any resulting sale of the developed site within five years of completion.

Block 76W was the PDC’s last property at the east end of the Burnside Bridge. A planning effort for the bridgehead began some 15 years ago. In 2004, the PDC selected Opus Northwest to develop all of the properties at once; however, that plan dissolved during the recession.

Momentum picked back up in 2009, when the PDC tweaked its framework plan to attract smaller projects in lieu of a larger one. Beam Development got the ball rolling with its redevelopment of the Eastside Exchange building.

Many other projects are planned in the area. Guerrilla Development has a six-story commercial building on tap for Block 76E (the other two-thirds of the block divided by Couch Street); Beam Development and Urban Development Partners are planning a mixed-use project at Block 75 (due north of Block 76); the Seattle office of Texas-based Trinsic Residential Group is preparing to begin a 159-unit mixed-use project on the block due east of Block 76E; and NFN Investments and Arthur Mutal are remodeling the R.J. Templeton Building on the south side of the bridge.

All of those projects are expected to be under way by early 2015.

“We expect that to be a pretty serious construction zone starting in about two months,” said Eric Jacobson, a senior project manager for the PDC.

He added that the tiny commercial building proposed for Block 76W will play an especially important role for the Burnside bridgehead.

“Our design objective was to treat this as a gateway to the entire Burnside Bridge,” he said. “This is – especially for (bicyclists) and pedestrians coming to the bridge – this is the first property they’re going to encounter. So it was really important for us for it to be activated.”

For Pickhardt, the project has been a long time coming. His company has been working on the Burnside bridgehead development since responding to a PDC inquiry in July 2010.

Pickhardt and Jeff Kovel, a Skylab Architecture principal, first presented drawings of the 21-story tower to the Portland Design Commission in April 2013, to mixed reviews. They received the commission’s approval in December.

“It’s been a really interesting project for us,” Pickhardt said. “And it’s certainly rewarding getting to a point where we’re actually ready to come out of the ground.”

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For more than half a century, the Broadway Furniture store has served as a sort of landmark in Northeast Portland.

“I grew up here, and it’s one of those commercial buildings you’ve heard (about) or seen ads on for years,” said Ryan Feigelson, director of acquisitions and dispositions for NFN Investments. “It’s just always been around.”

In recent weeks, however, passersby may have noticed the longtime tenant quietly vacating the century-old building as part of a move to Tigard. But it won’t be vacant for long.

NFN Investments has purchased the building, at 228 N.E. Broadway, for $2.89 million, and is planning a roughly $5 million renovation to accommodate a new anchor tenant. Feigelson could not name that retailer yet, but he said it would occupy the ground floor. PATH Construction is expected to begin the renovation soon; 10,000 square feet will be added by expanding a mezzanine level to suit a creative use.

Feigelson said several other potential buyers over the years attempted to acquire the building, but for one reason or another were unable to close a deal. NFN Investments acquired the property out of receivership from its previous owner, Shleifer Broadway LLC.

The building has significant advantages: Feigelson said approximately 30,000 drivers pass the nearly full-block site every day, and it has parking – a rarity in the area. He said the competitive sales price made for a perfect storm of favorable conditions.

“There are a lot of people that have shown interest: banks and grocers and even single fast-food restaurants,” he said. “(We thought) if we can find a way to make this work ourselves, then we’ve got a great acquisition here.”

Ryan O’Leary of Kidder Mathews represented NFN in the transaction; Don Drake of Melvin Mark represented the seller.

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