Construction of a 25-story tower in Portland’s West End is due to begin in early 2020 after the development team received a substantial investment from a Chicago-based group.

Cresset Partners and the Goodman family will be equal partners in a large-scale opportunity zone fund to kick off Eleven West. The mixed-use building planned at Southwest 11th Avenue and Washington Street will hold 222 multifamily units, 116,000 square feet of office space and 7,900 square feet of retail space.

The building will be a sister structure to Twelve | West, which was completed in 2009 and fetched $206 million when it was sold to Greystar Real Estate Partners in July 2018. Both projects were designed by ZGF Architects, with Gerding Edlen serving as developer.

Eleven West was approved by the Portland Design Commission in October 2017, but construction was delayed while the Goodmans sought financing.

The Goodmans hired Newmark Knight Frank in San Francisco to attract an opportunity zone partner. The firm found Cresset.

Critics say opportunity zones haven’t met their intended purpose of sparking investment in impoverished areas. Instead, across the nation, opportunity zone funds have presented investment opportunities in areas much like Portland’s West End – one of the hottest and most expensive real estate submarkets in Oregon.

Greg Goodman, president of Downtown Development Group, said if not for opportunity zones, Eleven West would have been the receiving end of a 1031 exchange – a tax treatment that allows investors to defer paying capital gains on real estate sales. Instead, state, county and city governments will receive taxes from the Eleven West project, he said.

“The state will get a big tax check they wouldn’t have otherwise gotten,” Goodman said.

Opportunity zone rules also encourage investors to hold onto properties for longer terms to fully realize tax advantages.

“It allows investors to take a longer-term approach and not be worried about building into an overbuilt market,” Goodman said.

Another opportunity zone fund is being used to attract investors to the 35-story Block 216 project in downtown Portland. That fund is managed by Baker Tilly Capital of Philadelphia.

Also, Sturgeon Development Partners is using an opportunity zone fund for a hotel project in Salem and possible future development projects.

Construction of Eleven West is slated to begin in late January, with Turner Construction serving as general contractor, Goodman said.

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In the past few years, a growing influx of new tech workers and residents has helped transform the city of Portland.

This population growth and demographic change has, in part, allowed the Goodman family and its Downtown Development Group to begin to put into action a series of development moves, including its ambitious . It calls for 11 new buildings, including five high-rises, on downtown properties near the Willamette River between Washington and Burnside streets. One of the first projects is 230 Ash – a modest, six-story mixed-use building, but much more is planned by Downtown Development Group – one of the oldest development firms in Portland.

For instance, preliminary plans have been formed for Downtown Development Group to work with a local, unidentified engineering firm on a net-zero building at the intersection of Southwest First Avenue and Pine Street.

“It will be like the Bullitt Center in Seattle,” Downtown Development Group co-President Gregory Goodman said, referring to the commercial building that opened in 2013 and was certified as a “living building” by the International Living Future Institute. The six-story, 52,000-square-foot structure uses solar panels and other green features to produce more electricity than it uses over the course of a calendar year.

Meanwhile, talks with an outside developer, Gregory Goodman said, have been ongoing about a possible project at the west end of the Morrison Bridge on Block 40, as well as another on a half-block site that currently serves as a parking lot just south of the Pine Street Market.

“We’ve had interest from people, but we don’t know what we’re going to do with that half block yet,” he said. “We were thinking a heavy-timber office building or maybe more housing, or a hotel? We’re trying to sort through all of that now. We’ve definitely had a lot of interest in other sites.”

Also, on Wednesday, the city received a proposal for a 33-story tower and podium building to be constructed on the full block owned by the Goodmans that is bounded by Southwest Ninth and 10th avenues and Washington and Alder streets. The project would include 750,000 square feet of office, hotel and residential space above ground and four and a half floors of underground parking.

The block is home to the largest collection of food carts in the Portland area.

One project that has moved along is Eleven West, which received approval from the Portland Design Commission in December 2017. ZGF Architects has designed the project for developer Gerding Edlen. The site is Southwest Washington Street, between 11th and 12th avenues. Plans call for a 24-story building featuring 7,900 square feet of retail space on the ground floor. Floors two through seven will hold 110,000 square feet of office space, while floors eight through 24 will hold 222 luxury apartments averaging 980 square feet each.

In addition, there will be four floors of below-grade parking accommodating up to 260 vehicles. A 7,900-square-foot rooftop amenity space will round out the project.

At 290 feet tall, Eleven West is intended to be “an iconic structure for our city in the west end,” Downtown Development Group co-President Mark Goodman said.

It’s also intended to mirror the Twelve West building finished in 2009 less than a block away. That building, rated Leadership in Energy & Environmental Design platinum, also developed by Gerding Edlen with Downtown Development Group as the largest investor.

“(Eleven West) has the benefit of two things,” Downtown Development Group Vice President Matthew Goodman said. “It has a proxy across the street that has performed very well. And, second, like any development, you learn from the things that went well, and we have the benefit of hindsight in having the parcel across the street and in the West End more generally. I don’t know if there’s a better location to be building that product right now.”

Currently, the project remains stalled because of needs for permits and full financing. In regard to the latter, Downtown Development Group is looking for a sizable financial partner, Matthew Goodman said.

“We want to be equity holders,” he said. “It’s an equity race, and we are trying to shop our partnership equity. With Twelve West we capitalized with a handful of families, but for this we’ll be looking for one large, potentially institutional investor. We’re kicking off the process and are hoping to have it wrapped up by the end of the summer.”

Eleven West, when it is finished, will join a surging West End replete with new office and hotel space. Projects include:  new six-story office building at Southwest 12th Avenue and Morrison Street; an 11-story, 179-room Moxy Hotel designed by DLR Group for a quarter-block parcel along Southwest Alder Street between 10th and 11th avenues; and a 15-story, 220-room Hyatt Centric hotel being built by Mortenson Construction on the same block at the corner of Alder Street and 11th Avenue.

“Look at the West End in the last year and it’s amazing,” Mark Goodman said. “It’s really got quite a there-there energy.”

Market conditions may soon change, he noted. But with interest rates still at historic lows, this may not be quite so important to investors and developers. This is, in part, what gives continuing impetus to projects like Eleven West.

“You have to acknowledge we’re toward the end of a development cycle,” he said. “But also key is that the cost of money is still historically cheap. Where you look at it from our perspective, where you look at holding it for many cycles, it’s more important to have low cost of funds than to directly develop into the right cycle.”

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The Goodman family – specifically, its Downtown Development Group – is one of the most prominent names in Portland real estate. That’s probably why the firm’s 230 Ash mixed-use development in the Skidmore/Old Town Historic District of downtown Portland has garnered so much more attention than a typical six-story building.

“It’s a really significant deal for us,” Downtown Development Group co-President Greg Goodman said Monday. “We’ve owned that property for 30-something years, we’ve assimilated 11 other properties in the area, and this is something we think will be the next West End or Twelve W. So, we’re going to go out of our way as we did in the West End to curate it and put local tenants in. It will represent Portland.”

Ground will be broken soon on 230 Ash, which is one of 11 envisioned developments comprising Downtown Development Group’s ambitious Ankeny Blocks plan. Early this week, general contractor Lease Crutcher Lewis started moving heavy excavating equipment onto the site for initial work at the half-block property.

230 Ash will include around 8,000 square feet of retail space on the ground floor, a mix of studio and one-bedroom apartments on upper floors, and a rooftop amenity space for residents. There also will be a below-grade parking garage and bicycle rooms at the basement and ground-floor levels with space for a total of 63 vehicles and 250 bicycles.

The building will hold a total of 133 residential units, 20 percent that will be “affordable.” These will be reserved for residents with incomes at or below 80 percent of the area median family income.

The development will be one of the few residential projects in the Skidmore historic district. While there is an affordable housing element, the residential units planned are definitely aimed at a specific demographic.

“This is the first multifamily project in that area,” Downtown Development Group Vice President Matthew Goodman said. “There’s a certain grit to the element around there, and this is not trying to reverse that; it’s trying to embrace that. We want to embrace the culture, because there’s a very exciting nightlife out there we think our tenants will enjoy.”

Matthew Goodman pointed out that recent figures show the proportion of so-called “young working class” residents, those 20 to 34 years old, living in Portland’s Central Business District is around 42 percent – double that of the rest of the city.

“We believe this is the perfect project for that demographic,” he said.

Notably, 230 Ash is the first Goodman family-owned project within the Downtown Development Group’s ambitious Ankeny Blocks plan to come to fruition.

The Ankeny Blocks, announced slightly more than two years ago, refers to the 11 downtown properties the family owns in an area between the Willamette riverfront on the east and Sixth Avenue on the west, and Burnside and Morrison streets on the north and south, respectively. Initial plans released by the firm envision up to five high-rise developments as tall as 460 feet, with others’ heights ranging from 75 to 325 feet.

The Goodmans are picky about who they will work with, having rejected several entreaties already from companies interested in building office space exclusively. Instead, they are looking to “curate” development in the Ankeny Blocks to create mixed-use space favoring businesses with local owners. They are taking this approach with 230 Ash, which they believe will be enhanced by the presence of other developments and businesses that add livability to the Skidmore historic district.

“We own land surrounded by people doing exciting things already,” Matthew Goodman said. “We’re not in a position where we’re reinventing this neighborhood; we’re excited to play a part in a neighborhood that already has a great organic trajectory. There’s arguably as much exciting stuff going on without us as with us, so it’s exciting to play a part.”

Design requirements for 230 Ash were stricter than for other projects because of the site’s location inside a district listed on the National Register of Historic Places.

“This is one of the few parcels that we own in this area that is historic,” Goodman said. “This wasn’t a ‘pick a design and build it.’ We had to build something we’re excited about, but built within narrow guidelines. It wasn’t as easy as it would have been in the other neighborhoods. It was something we haven’t had experience doing.”

This is why GBD Architects drew up 230 Ash to feature a brick exterior that complements neighboring buildings. The structure will be composed of two volumes at different elevations. A six-story mass will comprise the west side, while a five-story volume with a glass penthouse will sit to the east.

Downtown Development Group will retain ownership of 230 Ash once it is complete. Company co-President Mark Goodman said that participation in Multnomah County’s Multiple-Unit Limited Tax Exemption (MULTE) program will provide a 10-year property tax abatement that will allow 20 percent of the building’s apartments to be offered below market rate.

“That’s the same program that (Portland Mayor) Ted (Wheeler) has now offered to people who beat the inclusionary zoning deadline,” Mark Goodman said. “He’s offered that to get some more low-income units on the market.”

The 8,000 square feet of retail space can be divided to accommodate as few as two tenants or as many as five, he added. HSM Pacific Realty is handling leasing of those spaces.

Proximity to the Willamette riverfront and existence of a young, educated population in the city core should serve to boost developments like 230 Ash and other new developments, Matthew Goodman said.

“There is already a very strong workforce in the area, especially young creative people,” he said. “It’s great having people who are young and educated in the neighborhood. It’s good for the Ankeny Blocks and it’s good for our project.”

230 Ash

Owner: Downtown Development Group

Development manager: Gerding Edlen

Architect: GBD Architects

General contractor: Lease Crutcher Lewis

Leasing agent: HSM Pacific Realty

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A downtown hotel proposal from a Minneapolis developer sailed through a design review hearing Thursday.

The Portland Design Commission voted 6-0 to approve DLR Group‘s design for a Graves Hospitality hotel at Southwest 10th Avenue and Alder Street. The “boutique lifestyle” hotel will reach 12 stories and include 197 guest rooms.

The hotel will displace a row of food carts that face Alder Street and the northern side of Jake’s Grill. Some of the food carts have found other locations. The new hotel will incorporate on the ground floor four food establishments that will be integrated into the lobby in a food hall-like concept, said Benjamin Graves, president and chief operating officer of Graves Hospitality.

“We started looking at hotels here probably seven years ago,” Graves said. “Essentially, we’re a lifestyle company. We like to do business in places we like to go, where we like to hang out. We love Portland.”

Hospitality companies must expand beyond their hometowns, as there’s only so much room in any given market for a certain hotel concept, Graves said.

The hotel will fit snugly on the 7,500-square-foot lot. The hotel will also replace a surface parking lot. The property is owned by the Goodman family through limited liability companies. Graves said his company had agreed to a 99-year lease after the Goodmans declined to sell the property.

Graves Hospitality is a long-term holder of its assets, said Matt Mering, director of development.

Company executives said they expect to break ground as soon as possible after obtaining permits – likely this summer. Graves did not answer questions via email regarding the upcoming hotel’s brand identity.

Design commissioners greeted the project with enthusiasm. The hotel had been the subject of two prior design advice meetings.

“The design has evolved so well, so positively since the first conversation,” Commission Chairwoman Julie Livingston said.

The proposal does an “extraordinarily strong job” meeting public realm guidelines, Livingston said. The project would be a positive example for future design review applicants, she added.

The design was tweaked from the original proposal. The main entrance will face 10th Avenue instead of Alder Street. A decorative white band running around the corner of the hotel was removed. A light-colored vertical “fin” that will frame views from the hotel facing east toward the Willamette River and Mount Hood remained in the final design.

DLR Group principal Tim Ganey presented the design along with Graves Hospitality executives.

The design features brick masonry columns and glass on what promises to be an active ground floor. The design also accounts for a steep grade change on the property. Canopies were lowered to provide a better pedestrian experience.

“This is a space that I could see coming to and hanging out with friends, so I think it’s great,” Commissioner Andrew Clarke said.

Commissioner Tad Savinar said he was initially concerned the brick would be too dark, but was persuaded otherwise by samples of the material that were shown to the Design Commission. “You’ve convinced me with your sample that it’s not black,” he said.

No citizens testified regarding the proposal.

“Oftentimes we get folks from out of town who don’t get it, and you did get it,” Savinar said.

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