As many developers have held off building apartments in the face of new city regulations and rising costs, Koz Development has plunged in with a series of high-density, low-priced housing projects.

The Snohomish, Washington-based developer has six separate projects either under construction or in development in Portland; they total approximately 533 multifamily units.

In the process, Koz is providing affordable housing through Portland’s inclusionary housing rules and an older program that inclusionary housing replaced. Koz is developing approximately 80 affordable units while many other developers are building projects with none.

Koz’s projects are unusual. They include only micro-units, some smaller than 500 square feet. Many of the developments have no parking for residents, while others include a modest number of parking spaces.

Koz performs in-house architecture, seeking to replicate its model as cheaply as possible. The developer has stuck with one general contractor for its Portland projects, Seabold Construction. For some projects, Koz doesn’t even use a general contractor.

Koz – the name is short for “cozy” – has targeted Portland for its fast-growing population and employment base. The developer locates projects in Portland’s urban core, typically in dense areas close to public transit.

Of the six projects, two were conceived under Portland’s now-defunct MULTE program, which was replaced by inclusionary housing. Two newer apartment projects are in development according to the city’s inclusionary housing guidelines. The other two planned projects are condos, and therefore don’t include affordable rental units.

As the developments have proceeded, Koz has had to adjust to the city’s shifting rules for providing affordable housing. MULTE was a better fit, because the 10-year affordability period matched a 10-year property tax exemption, Koz CEO Cathy Reines said.

“From a financial perspective, (MULTE) is a program that is easier to justify,” she said. “The inclusionary housing program obviously is a little tougher. That reduction in rent goes out well beyond any kind of tax benefit you might get on the project itself.”

The inclusionary housing program’s fee-in-lieu option, which gives developers the ability to pay their way out of building affordable housing, isn’t feasible, Reines said.

“For our projects, paying the fee is not an option,” she said. “It’s cost-prohibitive.”

Koz’s business model is likely to appeal to 20-somethings in search of cheaper rents. As a business proposition, Koz makes less rent on each unit than more spacious apartments, but makes up for it with a higher price per square foot.

“Chunk rent is much lower than standard units,” said Brian Wilson, development partner at multifamily developer Mainland Northwest. “In terms of dollars per square foot on the property, and getting it financed and leveraged, it’s really good.”

Some neighborhood groups have raised objections to Koz’s projects on the grounds that their tenants are likely to use scarce street parking. Koz executives say many of their tenants are interested in urban living and don’t have cars.

Removing parking from the equation helps developers keep costs down, Wilson said.

“It’s one of the most expensive parts of the project, and you don’t get much return on it,” he said.

Koz is also considering building in downtown Salem, which has recently seen an uptick in development.

“It’s a great market,” said Joshua Scott, co-owner of Koz and leader of its design and construction teams. “We’re just looking for the right opportunity.”

Here’s a look at Koz’s projects in Portland:

• The furthest along is at 2165 S.W. Yamhill St., just west of Providence Park and south of Burnside Street. The project is relatively small at 30 units; six will be rented at 60 percent of the area median income. The building is currently being framed. Reines said the building should earn its certificate of occupancy in early 2018.

The units average about 290 square feet each, with 215 square feet on the ground floor and an additional 75-square-foot bedroom loft accessed by a staircase.

• Koz broke ground in early October at 1075 N.W. 16th Ave. in the emerging Slabtown neighborhood. The project will have 128 apartments in studio, one-bedroom and two-bedroom configurations.

Twenty percent of the units will be affordable, pegged to 60 percent of area median income. The project is immediately west of the Interstate 405 overpass.

• Koz plans its first Portland condominium project at 1111 N.W. 16th St. The building will have 65 condominiums – all studios. The units will be partially furnished with built-in Murphy beds. The condos will average 425 square feet, with “higher-end finishes” and air conditioning. The project is “truly intended to be an affordable, upscale condominium project there in the Northwest District.”

The condominium project will have some parking at grade level, but the number of spaces is to be determined, Reines said.

• Koz plans to break ground by the end of October at Southeast 13th Avenue and Ankeny Street, in the Buckman neighborhood. The project will be Koz’s first that falls under inclusionary zoning rules. Approximately 15 percent of the 87 units will be offered at rates affordable to 80 percent of the area median income. The project will have a mix of studio and one-bedroom units.
• A 108-unit apartment project is awaiting permits so that construction can begin at Southwest Fourth Avenue and Grant Street, near Portland State University. Twenty percent of the units will be affordable, pegged to 60 percent of area median income. Koz hopes to break ground in mid-November.
• Koz plans a condominium project at 4708 N.E. Sandy Blvd. The mixed-use building will have 114 residential units over ground-floor commercial space. The project replaces an Umpqua Bank branch.

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Take TriMet’s 4 bus from downtown Portland to St. Johns, and the trip serves as a rolling tour of the gradual gentrification of North Portland.

Riders travel along trendy Mississippi Avenue, with its high-end boutiques like Paxton Gate, which sells exotic taxidermy, and then onto Albina Avenue, a historically African-American neighborhood that has seen an influx of new residents and multifamily construction.

The bus line ends at St. Johns. There, in the shadow of the iconic, spearmint-green bridge spanning the Willamette River, a transformation is about to take place.

The North Portland neighborhood, long home to industrial sites and a racially and economically diverse population, is poised to see dense multifamily and commercial development of the type that has already transformed many of Portland’s close-in Eastside neighborhoods.

Two developers are responsible for a batch of new projects: Mainland Northwest, the Portland office of a Nashville, Tennessee-based developer; and Farid Bolouri, a local dentist turned developer. They’re following in the footsteps of PHK Development. Its Marvel 29, which opened in 2015, appears in retrospect to have laid the groundwork for changes to come.

Mainland Northwest is focused on several blocks near the Willamette River.

“We’d been looking for opportunity sites where everyone else was – the Southeast, Northeast, Interstate,” said Brian Wilson, a partner in the Portland office.

Then, a broker told him about property in St. Johns.

“It is one of the last close-in, affordable neighborhoods that is walkable, with good services, that hasn’t been overbuilt,” he said.

Mainland Northwest is planning to scrape the Steel Hammer site – 14.5 riverfront acres, including 8.5 acres of buildable land – for future development. Industrial businesses such as Columbia Forge & Machine Works are moving out, and Mainland Northwest is forging ahead with plans for mixed-use construction.

Ahead of the large Steel Hammer parcels, Mainland Northwest will develop two other blocks with multifamily projects.

A brief history of St. Johns

St. Johns was once a town unto itself. James Johns settled in the area in 1844 after moving from Linnton, according to the St. Johns Neighborhood Association. By 1849, 12 families were living in the area.

The proposed Steel Hammer development site is, according to Wilson, where Johns once landed his ferry.

St. Johns was recognized by the Oregon Legislature as a municipality in 1902. It was annexed by the city of Portland in 1915.

Marvel 29

Patrick Kessi, founder and president of PHK Development Inc., developed an affinity for St. Johns after exploring the neighborhood as a University of Portland student. He eventually raised his family in the neighborhood.

“It seems like it’s its own city out there,” he said. “I really like that community feel, and the sense of community there. I felt a quality development would be well-received by the community.”

In 2014, PHK completed Marvel 29 at the keystone intersection of North Philadelphia Avenue and Ivanhoe Street. The 127,720-square-foot building has 165 multifamily units and two retail spaces of about 900 square feet each that are occupied by Hoplandia and Pizza Nostra.

PHK still owns Marvel 29, which has received a Leadership in Energy and Environmental Design platinum rating from the U.S. Green Building Council.

Marvel 29 was the first modern, mixed-use development with underground parking in the neighborhood. The project was leased in about six months.

“It leased up faster than what we expected,” Kessi said.

Who is behind Mainland Northwest?

Mainland Northwest, a limited liability company, is a local subsidiary of The Mainland Companies LLC. Wilson and Ben Wood are the Portland-based partners.

Wilson is a native Portlander who previously worked at his family’s real estate firm, Kalberer Company. He has also been politically active, serving on the Portland Housing Advisory Commission and, in 2014, mounting an unsuccessful campaign against Jules Bailey for a spot on the Multnomah County Commission.

Wood previously co-founded and served as managing director of Promontory Healthcare Cos. He joined Mainland through a connection to the company’s CEO, Kenneth Larish – the pair met while attending Lewis & Clark Law School.

Mainland is backed by additional private investors, Wilson said.

North Crawford Street

Mainland Northwest is awaiting a building permit to begin construction on a full block of North Crawford Street between John and Charleston avenues. Plans for the 80,000-square-foot development call for 101 units, including 11 townhomes and 11 two-bedroom units. The balance will be split evenly between one-bedroom and studio apartments. A landscaped public plaza will be included. Pavilion Construction is the general contractor, and STACK Architecture is responsible for the design.

The vacant lot is fenced off, with dense brush covering the site.

Mainland Northwest expects to have a building permit in hand by late September, and then begin construction.

North Richmond Avenue

A similar building is planned on North Richmond Avenue with approximately 80 apartment units.

“That’s on a fast track,” Wilson said.

SERA Architects is designing the project, and R&H Construction has been selected to build it.

Steel Hammer site

Mainland Northwest is in the process of buying the 14.5-acre site along North Crawford Street from Tom Leaptrott, who owns Columbia Forge & Machine Works and Steel Hammer Properties LLC. The transaction will be split into two pieces because of liability related to the area’s Superfund designation. Mainland expects to take ownership of the first parcel by the end of the year, Wilson said.

GBD Architects is at work on a riparian redevelopment master plan for the site, Wilson said. The site is targeted for significant residential and commercial development.

In 2014, Leaptrott put the property up for sale and petitioned the city of Portland to change the zoning to allow for mixed-use development.

Mainland Northwest is looking to develop the forlorn parcels, Wilson said.

“There’s a desire to find dirt that other people can’t make sense of,” he said. “We want to bring our particular vision of not impacting the surrounding historic neighborhood by not displacing people.”

Industry is no longer dependent on using riverfront property. Redeveloping it makes sense, Wilson said.

“It’s not big enough for industrial users to use,” he said. “We don’t use the river that way anymore.”

Mainland Northwest has committed to building a stretch of the Willamette River Greenway across the property. Union Pacific Railroad tracks also run adjacent to the property. Wilson said he’s had initial conversations with railroad officials.

With the three sites, and possible further development in St. Johns, Mainland Northwest is looking to build hundreds of apartments.

“It could be, ballpark, 1,000 units,” Wood said.

That may not be all: Mainland Northwest is also considering other properties in the area.

“We have a couple of other opportunities we’re kicking tires on,” Wilson said.

Who is Farid Bolouri?

A co-founder of Portland Dental Group, Bolouri previously made news when he developed in Sellwood a four-story mixed-use building that required demolition in 2013 of a 107-year-old building that housed the Black Cat Tavern.

In 2014, Bolouri purchased for $395,000 a St. Johns property at North Lombard Street and Charleston Avenue. He has moved forward with development of The Union at St. Johns – a four-story mixed-use building.

“It was a very controversial project in the neighborhood because the city actually vacated public property to him,” said Lindsay Jensen, executive director of St. Johns Main Street. She wrote the city a letter in support of the project.

Bolouri did not respond to messages seeking comment on The Union at St. Johns.

The Union at St. Johns

In a walkable area near several eateries and bars, a construction crane looms over a massive hole in the ground. The block is the future site of The Union at St. Johns, which will have 20,000 square feet of ground-floor commercial space topped by 106 residential units. Plans also call for 89 below-ground parking spaces. Alan Jones of Jones Architecture designed the project, and R&H Construction is building it. Construction began earlier this summer.

What’s next?

St. Johns has seen a surge of new businesses move in. Many are in a warehouse that formerly housed Columbia Sportswear. It now hosts Occidental Brewing, a German-inspired brewery that this summer opened a wursthaus restaurant; Refuge PDX, which does special effects for the TV show “Grimm;” and Something Borrowed, which rents numerous items for weddings and other events.

The industrial area near the bridge is home to an idiosyncratic mix of businesses, including an outboard motor repair shop.

Some are leaving ahead of the coming development. Leaptrott is moving Columbia Forge & Machine Works to Washougal, Washington.

“I love St. Johns, but the city of Portland is awful to do business in,” he said, citing rampant homelessness, excessive regulation and an unfriendly business environment.

Leaptrott said he needs private security around the metalworking shop. Homeless camps sit nearby.

Many of St. Johns’ incumbent landowners are looking to sell and move on, Wilson said.

“A lot of these guys have been here for decades, and they’re on the glide path to figure out what they’re going to do with their next stage in life,” he said. “It’s a perfect transition.”

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