A Sullivan’s Gulch apartment building has become Leadership in Energy and Environmental Design platinum.

TwentyTwenty, with 162 units, was designed by Hacker for PHK Development. General contractor Andersen Construction completed its work in 2019.

The building received 85.5 LEED points; 80 is needed for platinum. Building systems that helped earn the rating include high-performance glazing and insulation, energy-efficient appliances and a highly efficient heating and cooling system that uses ductless mini-split units and heat pumps.

“We designed the units to optimize fresh air indoors and minimize exposure to airborne toxins and pollutants,” said Patrick Kessi, president and founder of PHK Development.

PHK’s most recent major project, The Windward in Lake Oswego, received a LEED gold rating.

Kessi said TwentyTwenty has hit its leasing goals to date. Coast Property Management is handling leasing for the building.

Advertised rents start at $1,599 a month for a one-bedroom, one-bathroom unit with 481 square feet. A 1,489-square-foot penthouse with two bedrooms and two bathrooms rents for $4,775. The building also has two levels of underground parking.

The units were originally built as condominiums, but PHK Development switched them to apartments.

TwentyTwenty is a 2020 91ĘÓƵ TopProjects finalist in the multifamily category.

Kessi said his next development project is a retail building in Scappoose.

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Rents continued to rise throughout Oregon and in Vancouver, Washington, this year amid broadly positive signs for the multifamily sector, according to a new regional multifamily report.

Older and cheaper apartments were especially in demand, while a steady supply of downtown Portland multifamily projects created some softness among Class A properties.

Rents for Portland studio apartments grew 1.1 percent during the past six months to $1,183 per month. One-bedroom apartment rents rose just under 2 percent, to $1,293.

The data is from Multifamily NW‘s semiannual Apartment Report. The fall 2019 edition was released Tuesday.

“Overall the market’s still looking very strong,” said Greg Frick, partner at HFO Investment Real Estate in Portland. Frick also served on the Apartment Report committee. “There’s still a low vacancy rate. All of the new construction, we’re absorbing that. Sure it’s a little slower than the last couple of years, but there’s not a lot in the pipeline behind that.”

Vacancies in the Portland-metro area fell to 4.42 percent, down from 4.96 percent six months earlier.

New housing regulations in Oregon are beginning to impact the multifamily market in Oregon and Southwest Washington, according to the report.

“New construction is slowing, and investors are losing confidence, as the political climate continues to be very challenging for landlords,” wrote Craig McConachie, president and principal broker at C&R Real Estate Services in Portland.

Oregon’s rent restrictions and high prices have led to renewed interest in Vancouver, the report states. A state law has capped rent increases at 9.9 percent in 2020 for apartments that are at least 15 years old. Newer buildings are exempt from the rent cap.

Some investors are sitting on the sidelines, brokers said.

“Most of the investors that I speak with are telling me they think things are overpriced,” said Gary Winkler, a Keller Williams-affiliated multifamily broker based in Lake Oswego.

“Transaction volume is continuing to slow down,” he said. “I’m seeing a lot more stuff on the market, just sitting.”

Vacancies vary by submarket. But the ongoing building boom has led to a surplus of new, high-priced apartment units in downtown and surrounding neighborhoods.

“Class A stuff downtown is getting competitive,” Winkler said. “There’s a lot of studios left they’re trying to lease up at different buildings.”

Rent spiked 32 percent in Lake Oswego, but the report stated that’s due largely to one new building. The report does not identify the building, but the description fits that of The Windward, PHK Development‘s 200-unit mixed-use building.

Rents were highest in downtown Portland, Northwest Portland and Lake Oswego. Among Portland’s close-in suburbs, Beaverton and Milwaukie both had tight markets, with vacancy rates near 3.5 percent.

Larger apartments have proved popular, with a vacancy rate of 3.7 percent in the Portland-metro area. Studio apartments had the highest vacancy rate at 5 percent.

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Developer Patrick Kessi made a bold bet by constructing a 162-unit condominium building when other developers wouldn’t touch condos. It didn’t pay off, and now Kessi is changing plans.

Kessi, president of PHK Development, said all of the units in the TwentyTwenty building now under construction will be converted into apartments.

“Pre-sales (of the condos) were slower than expected, but they were pretty good,” he said.

Interest rates increased in 2018, when pre-sales for the Lloyd-area building were under way.

“Now there are more products and more options, and there is a lack of urgency to immediately buy,” Kessi said. “The market isn’t really ready for condo sales now as it was two years ago.”

The units are now being advertised for rent – from $1,800 per month for a 481-square-foot studio to $4,125 per month for a 1,299-square-foot two-bedroom apartment. The building will be ready for residents in about two weeks, Kessi said. Coast Property Management is handling the rentals.

TwentyTwenty came on the heels of Hoyt Street Properties‘ Vista Condominiums, a 153-unit building that opened last year in the Pearl District. Also, BPM Real Estate Group‘s Block 216 tower, with 148 Ritz-Carlton condo units, is slated to open in downtown Portland in 2022.

Now TwentyTwenty will join a market that many consider overbuilt with luxury apartments. Kessi expressed optimism Lloyd will prove ripe for new apartments, particularly in a building with quality concrete and steel construction and contemporary architecture.

TwentyTwenty, designed by Hacker, will be “one of the most architecturally significant properties in more than a decade” in the area, according to Kessi. Andersen Construction is the project’s general contractor.

“There hasn’t been a building built recently that has been this type of construction,” Kessi said. “For the inner Eastside, we are competitively priced.”

TwentyTwenty could prove popular in the Central Eastside. Companies such as Autodesk have grown in the area, which now hosts about 17,000 jobs, according to the city of Portland. Meanwhile, office buildings such as 5 MLK and 7 SE Stark are due to be completed in coming months.

TwentyTwenty also has about 170 parking spaces for its 162 units. Parking has been at a premium in inner East Portland, where infrastructure hasn’t kept up with a boom in technology jobs.

Kessi previously developed The Windward in downtown Lake Oswego. The mixed-use project with 200 apartment units was completed in May 2018. The building is near full occupancy, he said.

Only a few condo buildings have been built in Portland during the past decade of economic expansion. Buyers began moving into Vista in October 2018. So far, 101 of the 153 units have sold, at prices ranging from the mid-$400,000s to more than $3 million, said Marilyn Andersen, principal broker at Hoyt Realty Group.

More people are looking at one-bedroom units, she said.

“We’re getting a lot of people who live in apartments – first-time homebuyers,” Andersen said.

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A 162-unit condominium project under construction in Portland’s Sullivan’s Gulch neighborhood is slated to be topped out with a final post-tensioned deck pour on Friday. Andersen Construction is building TwentyTwenty, designed by Hacker, at the corner of Northeast Multnomah Street and 21st Avenue for PHK Development.

Andersen is self-performing structural concrete work on the building, which rises seven stories above grade and has a two-and-a-half-story parking garage below grade, via subsidiary ASI Structures. Friday’s deck pour will be the 19th conducted on the project, which has presented a unique construction challenge due to the building’s shape. The seven residential floors are Z-shaped and atop a box-shaped parking garage, meaning none of the upper floors’ columns stack into the garage. As a result, the transfer deck was unusually large, with a thickness ranging from 19 to 42 inches and over 800 post-tension cables on the first-floor deck.

Along with completion of the building’s structural core, crews are finishing interior MEP work and prepping for cover on the first floor. Interior wall framing is finishing up to level three, glaziers are installing windows on the second floor, and plumbers are roughing in wet systems on the fifth floor.

According to Glenn Whitefield, Andersen Construction’s project superintendent, the biggest project challenge to date is being able to access the building from only one side. All material deliveries and concrete pours have to happen from Northeast 21st Avenue, which necessitates cautious sequencing and scheduling for deliveries.

Andersen began work on the project in September 2017, and completion is slated for July 2019. The stucco-clad building will contain studios and one- and two-bedroom units, and feature amenities including a fitness room, bike storage and workspace, a pet wash area and a ground-floor outdoor courtyard.

The project team includes Lango Hansen Landscape Architects, civil engineers Humber Design Group Inc., and civil engineers Kramer Gehlen & Associates Inc. The MEP design-build team includes Hunter-Davisson, IES Commercial & Industrial and Jackola Engineering & Architecture.

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A grand opening was held last week to celebrate completion of The Windward – a Lake Oswego mixed-use project. PHK Development‘s creation features three buildings with a combined 200 luxury apartments over 40,000 square feet of ground-floor retail space.

Lease Crutcher Lewis served as the general contractor on the project, which encompasses the 2.5-acre Wizer Block site in downtown Lake Oswego. The three buildings all contain four stories of luxury apartments over ground-floor commercial space and two below-grade parking garages, one each for residential and commercial tenants. The structures are all constructed of post-tensioned concrete and are steel-stud-framed.

The development features two public walkways, one connecting First and Second avenues and the other extending south to Evergreen Road. Residential amenities include a clubhouse with a kitchen and lounge space, an outdoor patio with a putting green, a bocce court and barbecue grills, a fitness space with a sauna and a spa, and a rooftop conservatory with patios, a catering kitchen, dining table and fireplace.

The project’s design team includes ZGF Architects, Ankrom Moisan Architects, and Lango Hansen Landscape Architects. The building is being managed by Greystar, and Commercial Realty Advisors NW is handling retail leasing.

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Luxury condos, once regarded by developers as a dead end, are making a comeback. The latest example: the ambitious proposal from Portland developer Walt Bowen for a 35-story tower on a full block in downtown.

The Block 216 project would have approximately 148 high-end residential condominiums. The skyscraper would also include a 250-room luxury hotel and 175,000 square feet of office space.

A few other major projects now under construction in Portland include condos, including Vista Condominiums, a 153-unit building in the north Pearl District from Hoyt Street Properties, and TwentyTwenty, a 162-unit project in the Sullivan’s Gulch area, from PHK Development. Also, The Waterfront Vancouver will have 40 condos adjacent to a luxury hotel. That project, from Gramor Development, is expected to be completed in 2020.

The move to build luxury condos represents a modest comeback for the product type. After the economy tanked in 2009, condo development all but halted in the Portland area.

At the same time, a flood of apartment construction in recent years has resulted in a softer market for luxury apartments. Rents in Portland were down 2.2 percent in May compared to a year earlier, according to Apartment List.

Many luxury apartment managers are offering concessions to sign up new residents. In that environment, some developers are looking anew at condos as a more competitive product.

Bowen, in a response to questions via email, stated the Block 216 condos will be unique in the city.

“Portland does not have any high-end, co-branded hotel condominiums like other cities,” stated Bowen, who is president of BPM Real Estate Group. “We believe there is demand for this type of product.”

The condos will begin on the 21st floor, giving buyers commanding downtown views. Bowen also pointed to timing: Vista will deliver more than three years before Block 216 is ready, allowing plenty of time for market absorption.

An alternative multifamily option was explored for Block 216 and rejected, according to Bowen.

“Market-rate apartments are not economically viable for this project,” he stated.

Cost is one of the challenges for condos because they tend to be more expensive to build than apartments. Condos are typically built with concrete and steel stud frames, while apartments often have wood frames. Condo developers also face greater legal liabilities from homeowners.

Patrick Kessi, president of PHK Development, said he does not believe the Portland area will see a rush of condo building.

“I think it’ll be a measured amount of building with condos,” he said.

At TwentyTwenty, condos will start around $300,000 for one-bedroom units and $500,000 for two-bedroom units.

Hoyt Street Properties’ Vista Condominiums in the Pearl District is expected to be completed in October.

So far, 90 of the 153 condos have sold. Tiffany Sweitzer, Hoyt Street Properties’ president, said she expects sales to accelerate once potential buyers are able to tour the units. Prices range from $441,000 to $3.2 million.

“People are not wanting to buy a year or two ahead of time,” she said. “They’re wanting to look at product.”

Sweitzer doesn’t believe condos alone would work at Block 216.

“They have hotel and office that can help their bottom line,” she said. “Could a luxury tower be built without those other components to it? I don’t think so.”

The city’s inclusionary zoning rules pose another significant obstacle for condo developments. The policy requires developers build affordable units or pay a hefty fee. The Block 216 project team has indicated it will take the latter route, with plans to pay $7.5 million into the city’s affordable housing fund.

City officials are looking at possible changes to the policy to address complaints from developers.

The rules are unworkable, Sweitzer said.

“We will not be building for-sale product with the rules that are currently in place, but the rules are in flux,” she said.

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LAKE OSWEGO – Like many new developments, Patrick Kessi’s 200-unit luxury apartment project started with a relationship.

Around a decade ago, Kessi served on the University of Portland board along with Gene Wizer, a local businessman who owned a keystone block in downtown Lake Oswego. Wizer had long had notions of redeveloping the block, which was home to small shops, and had discussed the possibilities with a succession of developers.

The recession scared off most firms. With few developers interested in tackling a big project, Wizer asked Kessi for his impressions.

“He had talked to multiple developers for years and years,” Kessi said of Wizer, who died in 2015. “I knew him from the board, and when the market went down, he asked me to take a look at it.”

Kessi liked what he saw. Lake Oswego’s community could support an expensive project. The city had invested in the area, and opened Millennium Plaza Park. Another developer built Lakeview Village, bringing high-end shopping to the neighborhood.

Housing could be the missing ingredient, Kessi thought.

“It was a very good time to start looking at new properties in this location,” he said.

A decade later, The Windward is opening to residents. The first tenants can begin moving in on March 15.

The opening marks a milestone for Kessi and his company, PHK Development, which has focused on developing condos and apartments in the Portland area.

PHK fought opponents of the project for years. Lake Oswego’s Development Review Commission denied the project, but Kessi successfully appealed to the City Council. The Oregon Land Use Board of Appeals and then the Oregon Court of Appeals affirmed the City Council’s decision, until finally the state Supreme Court declined to hear the case. The appeals were lodged by the Evergreen Neighborhood Association and a group called Save Our Village.

Kessi, a Portland-based developer who grew up on a dairy farm in Scappoose, was confident enough in the eventual outcome that he had his general contractor, Lease Crutcher Lewis, break ground before the Supreme Court turned down the case in November 2015, letting the favorable appeals court ruling stand.

After some community backlash, the design was reduced from five stories to four.

Kessi said he’s pleased his patience was rewarded.

“If you do the right thing, the right thing will happen,” he said.

The Windward is nearing completion, with 200 luxury apartments, more than 42,000 square feet of commercial space and 430 underground parking spaces, including 135 public spaces.

“From the outside, the building looks really good,” said Jackie Manz, a Lake Oswego city councilor. “There’s quality materials. It’s amazing how quickly it has come to fit into our downtown streetscape.”

Apartment configurations range from studios to three bedrooms, spanning 650 square feet to 2,400 square feet and renting for rates of $1,600 to approximately $6,000 a month – an eyebrow-raising rate that could pay down a hefty home mortgage.

Kessi said the initial tenants are mostly Lake Oswego residents and former residents with ties to the tony suburb southwest of Portland who are interested in the downtown lifestyle.

“It’s the person who doesn’t want the yard maintenance, the house maintenance, who wants the security,” he said.

The ability to walk to restaurants and shops nearby has also proved a popular draw. Early interest for the apartments has been strong, Kessi said.

The development is also attracting commercial operations. So far, ice cream maker Salt & Straw, pizzeria Chuckie Pies, Bamboo Sushi, fitness studio StarCycle, Richard Henry Barber Co. and clothing retailer Adorn have signed deals for space in The Windward. Some of the commercial spaces have been offered for sale.

“We have a good mix of Portland best-in-class and Lake Oswego best-in-class commercial tenants,” Kessi said.

The Windward is composed of three buildings, each of which follows a Lake Oswego design style: “Oregon Rustic,” “English Tudor” and “Arts and Crafts.”

The structures are largely concrete and steel studs, not wood-framed, opening the possibility of a later condo conversion. Kessi said any conversion to condos would not happen until years in the future. The apartment tenants are on one-year leases.

Kessi said the building will be rated Leadership in Energy & Environmental Design gold for environmental performance.

Lake Oswego’s redevelopment agency is subsidizing the development with $5.2 million for development costs and permits and $749,000 for construction. The city received from PHK Development public parking, a public easement that allows pedestrian access between First and Second streets and assurances that the commercial spaces facing First Avenue and A Street would be active-use retail, said Elaine Franklin, a spokeswoman for The Windward.

The project was designed by ZGF Architects and Ankrom Moisan Architects. A public pension fund provided financing.

PHK Development is also building a 162-unit condo project at Northeast 21st Avenue and Multnomah Street in the Lloyd District.

After that?

“And then, we’ll just keep going,” Kessi said. “It’s what we do.”

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A California investment firm has invested $63.5 million in PHK Development‘s condominium project now under construction in Northeast Portland.

Canyon Partners Real Estate, a Los Angeles limited liability company, has provided the senior loan to an affiliate of PHK Development Inc., the lender announced Tuesday.

Canyon Partners has invested more than $1.4 billion in condo projects nationwide, but this is its first time stepping into the Portland market.

PHK’s seven-story, 162-unit project will bring for-sale units to the market. Few condo projects have come to market since the previous recession as multifamily developers overwhelmingly chose to build apartments.

The project at 2034 N.E. Multnomah St. is scheduled to be delivered in late 2019. It will have a mix of one-bedroom, two-bedroom and penthouse units.

PHK’s Patrick Kessi has previous experience building condos, including the 937 Condominiums in the Pearl District.

Records show an LLC controlled by Kessi purchased the Multnomah Street property in 2016 for slightly more than $4 million.

Holliday Fenoglio Fowler LP arranged the financing, and was led by senior managing director Tom Wilson and managing director Bryan Clark.

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Lake Oswego’s Wizer Block project has been branded The Windward.

The 200-unit luxury apartment project in the tony Portland suburb is expected to begin leasing this summer. Residents are anticipated to move in during the first quarter of 2018.

The Windward consists of three buildings, modeled as “English Tudor,” “Arts and Crafts” and “Oregon Rustic,” respectively.

The $100 million project comes from Patrick Kessi’s PHK Development. The Windward also offers 42,000 square feet of commercial space and 430 parking spaces, including 135 public spaces.

Bentall Kennedy U.S. Core Fund is the project’s major investor.

The name The Windward was chosen to reflect the property’s location above Lake Oswego, Kessi said in a prepared statement.

The Windward is the first mixed-use development to be built in downtown Lake Oswego in at least 17 years, according to the developer.

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(Editor’s note: This post has been updated to include the two architecture firms working on the project.)

PHK Development‘s Block 137 mixed-use project continues to take shape on a downtown Lake Oswego superblock. Lease Crutcher Lewis is the general contractor on the project, which was designed by ZGF Architects and Ankrom Moisan and includes three four-story concrete and steel buildings.

Major structural concrete work is now complete, with around 20,000 cubic yards poured. Form work and shoring are being removed from Building B, and crews are installing wall panels that have been assembled off-site and preparing for steel stud framing. On Buildings A and C, crews are installing sheathing and flashing, windows, elevators, preparing for mechanical, electrical, and plumbing rough-ins, and installing brick facades.

The project will have a total of 200 residential units ranging in size from studios to three bedrooms, including four townhome units, as well as over 40,000 square feet of commercial space fronting A Avenue and First Street, and below-grade parking. It is slated for completion in early 2018.

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