A New York City investment firm snapped up a Lake Oswego luxury apartment building this month for $66 million.

Sentinel Real Estate purchased the 158-unit Willow Apartments, in the Kruse Way area, in a transaction that values the 2-year-old development at $417,721 per unit — a high-end valuation for the Portland market.

The seller was an entity tied to the original developer, Shorenstein Properties of San Francisco. Deacon Construction built the project, which was designed by GBD Architects.

“Willow Apartments aligns with our strategy of acquiring high-quality rental communities situated in markets characterized by limited supply, strong population growth and positive economic fundamentals,” George Tietjen, Sentinel’s managing director, stated in a news release.

“Lake Oswego is considered one of the most affluent and supply-constrained submarkets in the greater Portland metropolitan area given its high household incomes, desirable schools and limited new multifamily development,” Tietjen added.

Willow Apartments offers units with one, two or three bedrooms, community amenities including a sky lounge, flexible dining and workspaces, private work pods, a fitness center with forest views, an open-air deck and a barbecue patio, covered parking spaces with electric-vehicle charging, multiple storage areas and a pet-grooming spa.

Willow Apartments sits on a 5.16-acre site at 5600 Meadows Road.

This property will “benefit from durable rental income and sustained market demand for upscale living spaces” in Lake Oswego, Tietjen stated.

JLL Capital Markets Senior Managing Director Ira Virden and Managing Director Carrie Kahn represented the seller.

Clackamas County recorded the transaction on July 10.

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At Mercato Grove, visitors will find a mix of suburban swankiness, contemporary Portland brands and a construction type that is more common in Sun Belt metropolises.

The Lake Oswego mixed-use community is now open at 4055 Mercantile Drive. It includes 206 apartments and almost 50,000 square feet of retail space.

For developer Trammell Crow, Mercato Grove comes as interest has grown in suburban living amid social turmoil in urban Portland.

In many ways, Mercato Grove brings Portland to Lake Oswego: The restaurant group ChefStable has invested heavily in Mercato Grove with five restaurants: St. Jack, Tasty, Oven & Shaker, Grassa and Lardo. Complementing the ChefStable offerings are Fills Donuts, Ovation Coffee and Clean Juice.

The retail is anchored by a CVS pharmacy and Orangetheory Fitness.

The buildings, designed by SERA Architects, balance Lake Oswego’s approved architectural styles.

“Everyone wants to live in a boutique environment,” said Damin Tarlow, senior vice president for Trammell Crow’s Portland office. “No one wants to live in a big building, so how do we break these up?”

Trammell Crow launched the project as part of its High Street Residential brand. Mercato Grove is a joint venture with CenterCal Properties, the property owner.

The property formerly held a series of small Providence medical buildings. CenterCal brought the properties under contract, and linked up with Trammell Crow – the developer had previously worked with the real estate firm on Cascade Station.

“We decided to do it together,” Tarlow said.

Deacon Construction was brought on as general contractor. The Portland-based firm helped create a wrapped parking structure, with buildings surrounding central parking. This construction type is sometimes called a “Texas donut” because it’s more common in cities with ample space, Tarlow said.

Portland’s small blocks make a wrapped parking approach difficult within the city, although a proposal from Mill Creek Residential Trust for Goose Hollow (design review is ongoing) would have a wrapped parking structure.

Deacon brought in from its Sacramento office a project superintendent, Johnny Seuferling, who had experience building a wrapped parking structure.

Befitting its suburban location, Mercato Grove has 550 parking spaces, including 211 for retail use.

The residences comprise more than 60 unit types, said Eric Henry, project executive at Deacon. The apartments come in configurations from studios to three-bedroom units of up to 2,200 square feet. The average unit size is 972 square feet.

“We really took a single-family approach,” Tarlow said. “We wanted it to read as a single-family home.”

Leasing of the apartments began in April. They’re approximately 50 percent leased, Tarlow said.

Mercato Grove’s interior design is by CID Design Group of Naples, Florida. Interior elements seek to balance individual and group living. There’s a shared kitchen with large appliances such as a juice maker and a bread maker that residents may not have in their own units. A kids’ maker space comes equipped with chalk, toys and hiding spaces.

Mercato Grove has no commercial office space, but that doesn’t mean the project team has forgotten about the workplace. Residents have access to three conference centers with large TV monitors, shared tables and break-out rooms.

“This is our interpretation of how people work these days,” Tarlow said.

He hopes the amenities will prove appealing among office workers who expect to enjoy increased flexibility to work from home once the pandemic subsides.

“Some of this looks like it was designed for the post-pandemic world, which it was not because it was designed two to three years ago,” he said.

The project was completed after 25 months of construction. Some of the exterior panels were prefabricated, which sped construction.

“Without that prefab, it would have been really hard to stay on schedule,” said Chip Laizure, vice president of Deacon Construction.

The project was delayed by numerous obstacles, including wildfire smoke in September 2020 that paused construction for four days, a February ice storm that crippled the region and a flooded wetland in September 2019 that interfered with foundation work.

Deacon also dealt with labor shortages related to the pandemic, including 22 positive COVID-19 tests during construction.

Now that Mercato Grove is done, visitors may notice a duck theme throughout the premises. There are live ducks in a pool, duck murals, a duck phone, even a duck statue. The idea came from the marketing team and quickly snowballed.

“I lost control of the duck situation,” Tarlow said.

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Deacon Development has joined a pair of investors to purchase a downtown Salem building that formerly held a Nordstrom store.

“We look at it as an opportunity, even though we honestly don’t know what it’s going to be,” said Steve Deacon, CEO of Deacon Development.

The property, at Salem Center, is approximately 69,000 square feet, including 30,000 square feet on each of the two floors, and a 9,000-square-foot mezzanine. Nordstrom closed the store in April 2018.

Deacon said the project team is seeking a new future for the building, which was completed in 1980.

“We’re investigating a few different possibilities,” Deacon said. “We’re looking at fitness, entertainment, even hospitality and multifamily.”

He added, “We’re out in the market talking with people, and seeing what the best fit is going to be.”

Deacon is partnering with Kelly McDonald and Patrick Carney, two Salem-area investors. Terms of the deal were not disclosed. Marion County recorded the sale on June 17, but did not provide the purchase price. Nordstrom Inc. was the seller, while two limited liability companies tied to Deacon and Carney were the buyers.

The property at 420 Center St. N.E. is located within an opportunity zone that covers much of central Salem, conferring a host of tax advantages.

“We feel very good about the location – the downtown,” Deacon said. “We like what downtown Salem has to offer. We think it’s going to be a growing, developing area.”

Deacon said he’s growing more comfortable in the Salem market. In West Salem, Deacon is nearing completion on a three-building mixed-use development called The Pointe at Glen Creek. The development will open around Aug. 1 with tenants such as Gilgamesh Brewing, pet supplies store Mud Bay and a DaVita dialysis center.

Deacon Development used Deacon Construction to build the project at Glen Creek Road and Wallace Road.

“It took some creativity to turn an industrial-use site into what I think is going to be a very appealing corner restaurant-retail site,” Deacon said.

Deacon Development is likely to use Deacon Construction for tenant improvements in the ex-Nordstrom building as well, Deacon said.

“Our philosophy is we use the contractor that is best suited for the work,” he said. “I would say that with Deacon Construction’s background in remodel and retail and seismic, they would be a good fit.”

The building may need a seismic retrofit, depending on its eventual use, Deacon said.

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