SERA Architects, midway through schematic design for a new mixed-use development that will replace the Oregon Ballet Theatre building in Southeast Portland, is seeking design advice from the city.

Kurt Schultz, a SERA principal, scheduled a Feb. 5 hearing to gain feedback from the Portland Design Commission for Mill Creek Residential Trust‘s Modera Belmont project. The planned six-story, 230,000-square-foot building, at 818 S.E. Sixth Ave., will have approximately 220 residential units, ground-floor retail space and below-grade parking.

The design team is making good progress, but would like commission’s feedback on the overall look of the project before seeking city design review approval, said Sam Rodriguez, managing director of Mill Creek Residential Trust’s Portland office.

“The aesthetics are up in the air right now,” he said. “It’s going to be kind of a modern building picking up from the industrial influences in the neighborhood.”

The development will be geared to attract residents age 25 to 35, with amenities such as a bike storage and repair room and a rooftop terrace, Rodriguez said. Plans for the ground floor call for 7,000 to 8,000 square feet of retail space facing Southeast Morrison Street, and live-work units facing Southeast Belmont Street.

Mill Creek Residential Trust last fall purchased the 14,000-square-foot Oregon Ballet Theatre building, with plans to demolish the 74-year-old structure to make way for new development. Rodriguez declined to give the sale price and the estimated cost of the project.

Rodriguez said he hopes to start construction on the development by the end of this year. Mill Creek Residential Trust will serve as the general contractor.

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The developer of a proposed multifamily building in Portland’s Goose Hollow neighborhood earlier this month withdrew its request for a zoning change that would have allowed the project to include two levels of underground parking.

Mill Creek Residential Trust LLC wants to develop an eight-story building with between 260 and 280 residential units on a now-vacant lot bordered by Southwest Main and Madison streets and 19th and 20th avenues – also known as Block 7.

Steve Janik, a partner at Portland-based Ball Janik LLP, the law firm representing Mill Creek Residential Trust, said plans for the building call for approximately 225 parking spaces reserved for Multnomah Athletic Club members using the facility, and 191 for apartment tenants.

“The City Council is asking to have more information before they make a decision, including a (Central City Parking Review), and we want to make sure they have everything they need,” said Sam Rodriguez, managing director of Mill Creek Residential Trust’s Pacific Northwest office. “We were originally told not to do the review and that it wasn’t required until a zoning change had been acquired.”

In order to excavate and construct the underground parking, the developers needed the city to change the zoning from residential to commercial. The zoning change would apply only to the parking structure; the rest of the building would comply with existing residential zoning. Additionally, if future developers wanted to raze the apartment building and redevelop the land, the zoning on the parcel would revert to residential.

The building would also contain approximately 16 studios to be used by the Multnomah Athletic Club as short-term stay (hotel) rooms for use by MAC guests and members.

Mill Creek Residential Trust partnered with MAC owners – who also own the block proposed for development – on the project, entering into an agreement to take on part ownership of the land in exchange for the new parking spaces.

Rodriguez in November 2013 met with members of the Goose Hollow Foothills League to discuss plans to construct an underground tunnel beneath Main Street to connect the 225 MAC parking spaces to the existing MAC parking garage in an effort to lessen traffic congestion in the area. The tunnel would enable drivers parking in the Block 7 underground lot access to the garage via the existing entrance to the MAC garage.

In order to dig down two stories, the developers applied to the Bureau of Development Services to change the lot zoning from residential to commercial – a change that would have applied only to this particular project.

On July 10, 2014, a hearings officer with the Bureau of Development Services issued a recommendation of conditional approval for the proposed zoning changes. In December, Portland City Council considered the zoning change and requested that the developer conduct a more comprehensive traffic study to justify the increased number of parking spaces. Alternately, the council suggested that the developer withdraw its request for a zoning change and reapply after revamping the plans, said Jerry Powell, co-chairman of the Goose Hollow Foothills League’s planning committee.

“I can only speculate why they elected to start from scratch, but they had done just a very, very cursory traffic study,” Powell said. “What the council wanted was the kind of traffic study required by a Central City Parking Review to justify the site’s need for additional parking.”

On Jan. 8, Rodriguez withdrew the application for a zoning change and on Jan. 14 the city issued a notice of final decision for the zoning change, stating that because the applicant terminated the application process, zoning for the site remains residential.

“The plan is to update the traffic studies, do a CCPR (and) then integrate the new information into the application,” Rodriguez said. “We basically pulled our application, and we’ll reapply with the information the city wants.”

Rodriguez expects the process – conducting the traffic study and reapplying – to take between six and eight months. He said plans for the site haven’t changed, and he’s confident that the new parking spaces will not affect traffic around the MAC negatively.

“Our traffic study shows that it would work fine without the tunnel, but that it works much better with the tunnel,” he said. “At the end of the day it’s the same amount of traffic volume, and having the additional spaces will keep people from being turned away from the existing garage when it’s full, or nearly full, and driving around the neighborhood to find a place to park.”

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Good things may come to those who wait. But if Sam Rodriguez had known how long the wait for the Jefferson Street Flats was going to take, he may have thought twice about the Goose Hollow project.

“The project was essentially two years in the making,” said Rodriguez, the managing director of Mill Creek Residential Trust’s Oregon office. “If you expected that you’d say, ‘God, is this worth the brain damage?’ We expected some delays; we just didn’t expect that much.”

Mill Creek recently broke ground on the 134-unit apartment at Soon, a large crane will mark the site as construction of the $27 million project progresses over the next 24 months. For the project team, it’s a major milestone after months of negotiations and obstacles.

First and foremost was acquisition of the property.

Half of it was owned by a private party. The rest was owned by TriMet, which acquired the property during its west side light rail extension in the mid-1990s, and used as a parking lot. Mill Creek wasn’t the first development company to try to assemble the two lots.

Sometime around 2006, a limited liability company for Santa Monica, Calif.-based Worthe Real Estate Group entered into an agreement with TriMet to develop a series of parcels in the Goose Hollow neighborhood.

While the series included the parcel now pegged for the Jefferson Street Flats, according to Rodriguez, the most high-profile component was directly across the street from the Multnomah Athletic Club, where Worthe planned to build a 21-story tower called the Allegro Condominiums.

The Allegro project was highly controversial because the company planned to use a provision in the city’s planning code to essentially double the site’s floor-area-ratio. Neighbors objected to the project’s size, which spurred a citywide debate over FAR transfers. The city council ultimately squashed the project on appeal.

“They used (a provision in the) Central City Master Plan, which is the only way to exceed normal (FAR) transfers,” said Karl Lisle, a senior planner for the Bureau of Development Services. “They were really pushing it in terms of getting the largest building out there.”

Lisle said city planners are currently revisiting some of the FAR questions raised during that debate in its update to the central city plan.

With its high-rise plan scuttled, Worthe reconfigured a smaller project, but by that time its agreement with TriMet had expired. When TriMet moved to terminate the deal, Worthe sued for $53.5 million, according to a 2008 article by the Portland Tribune.

Rodriguez, meanwhile, waited for the litigation to run its course. When it finally did, he approached the transit agency about a new deal for the Jefferson Street Flats. Negotiations took a long time, but considering what TriMet had on its plate, he said, it was a miracle it happened at all.

“TriMet was also doing all the land deals for the (Portland-Milwaukie Light Rail), so this was a pittance next to what they needed to do,” Rodriguez said. “So I must say I was very impressed with TriMet’s willingness to take this on at a time when they were busy as hell with that.”

TriMet, for its part, was eager to see development on that lot – a tiny sliver with a dramatic slope that was also required by the Federal Transit Authority to provide 18 parking spaces to replace the ones consumed by MAX.

“So we thought the site, because of all those burdens, would never redevelop,” said Kathryn Krygier, TriMet’s Transit Oriented Development program leader. “Then when Sam got control of the adjacent property and made the possibility to connect the two that is really what made the project go.”

Ironing the details of the property sale with the FTA though, took nearly 18 months. TriMet only recently closed on the $200,000 sale in September, once Mill Creek had all its permits and financing in order – JP Morgan is the project’s lender.

Getting through the design process alone took a year. Early on, neighbors at the adjacent Arbor Vista Condominiums took issue with the project’s size. Mill Creek worked with design commissioners to break up the building’s massing, but there was little it could do to lower the six-story height and still make the project pencil.

The project got design approval in March. Rodriguez said some of the Arbor Vista people contacted the Goose Hollow Foothills League Neighborhood Association to appeal the development to the Oregon Land Use Board of Appeals, but the association opted to support the project. The issue fizzled.

Numerous other design challenges presented themselves.

Today, the façade features a mix of warmly colored cement paneling and natural wood siding. The building will also have a rooftop deck and garden, as well as three levels of underground parking with 118 stalls – in addition to 18 dedicated public spaces to make up for the ones TriMet is obligated to provide.

Krygier hopes the Jefferson Street Flats will set the stage for future projects.

“I just think it’s an excellent project and a good model for us on how we can redevelop parking lots,” she said. “I think that’s going to be the challenge in the future – how to redevelop some of our park and ride facilities.”

That was a big part of the site’s attractiveness for Rodriguez, who said the building will be a 25 minute light rail ride from either Intel or the airport. Michael Corl, a partner at Vallaster Corl Architects, which designed the building, is pleased to see it finally take shape.

“It’s a very challenging site and that’s taken some time to ferret out all the issues, but we’re happy,” Corl said. “We just want to see it up. We just want to get that baby built.”

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A few issues remain to be ironed out at the Con-way development site in Northwest Portland.

On Wednesday evening, Con-way Vice President of Corporate Development J. Craig Boretz joined principal Phil Beyl, Vice President of Development Sam Rodriguez and Northwest District Association President Ron Walters at the Lucky Lab Beer Hall in Northwest Portland to present an update of their efforts to develop a master plan for the project. The event, which was organized by the Portland Young Leaders Group, drew approximately 90 people.

“Probably the biggest open issue is in the location of open spaces – i.e., parks,” Beyl said in an interview before the presentation.

Beyl said Con-way donated approximately 23 percent of the total land area to Portland Parks and Recreation for use as open space. GBD’s preference, Beyl said, is for two distinct spaces: a vibrant urban plaza and a smaller, traditional green space with playground equipment. But Portland Parks and Recreation’s preference is for one large area, he said.

Overall, the 17-acre site is slated to include 1,100 to 1,500 residential units, 368,000 square feet of office space and 144,000 square feet of retail space – approximately 1.9 million square feet of new development using a proposed 3-to-1 floor-area-ratio.

“But the caveat to that is our master plan is completely focused on being responsive to the marketplace,” Beyl said. “So we’re not locking ourselves into providing specifically any of those numbers. But everything we’re doing – from traffic analysis, from a massing standpoint, how we address parking – we’re using those numbers as our expected target.”

Beyl did propose a building height of 87 feet, which translates into a 17-foot-tall ground floor to accentuate retail spaces, and seven 10-foot floors stacked on top.

Rodriguez, however, said that if an eight-story minimum were required for the neighborhood, Mill Creek’s development plans would become less certain.

Mill Creek is building a 179-unit market-rate apartment complex called Savier Flats at 2244 N.W. Savier St. Rodriguez said the firm would like to build housing on the nearby Con-way site, but feasibility will depend on terms of the master plan.

“If they make me do eight stories, I won’t be able to buy land from them,” he said.

It’s a question of the economics, Rodriguez said. Mill Creek can build everything up to six stories with wood, or a combination of wood and concrete. But everything taller than six stories must be built with concrete, and that is expensive, he said.

“Trying to do eight-story buildings is a bad idea,” Rodriguez said. “You’re using a very expensive building type to do the minimal density you can do for that building type. If you’re going to do concrete construction, high-rise doesn’t even work today unless – you need to do at least 22 stories.”

It was unclear at the meeting Wednesday whether eight stories would be a minimum or maximum building height.

The team has decided to place all parking underground. Beyl said that will allow the team to meet its density goals and enhance the neighborhood’s character.

“It’s simply the right place to put it if we’re going to try and maintain all of the ground-floor space to be active and vibrant and pedestrian-oriented,” he said.

One parking question that remains is how Con-way will meet the needs of its 750 employees, because the company is planning to repurpose its existing parking land for development. Beyl said the company will need approximately 800 parking spaces and that a kind of shared-use plan between employees and residents is being considered.

Plans for a neighborhood grocery store also are still on the table, and Boretz said officials are working with a local developer to attract a client to a vacant warehouse on the site. Beyl said that effort will require amendments to the Northwest District Association’s district plan, which limits retail spaces to 20,000 square feet.

“There happens to be one project in play, one developer in play, that is fairly confident they can attract a neighborhood grocer to a certain site, and we want to make accommodations for that because groceries are usually larger than 20,000 square feet,” Beyl said.

At the end of the presentation, several questions were issued by attendees. Josh Lehr, an associate broker for , asked about the level of housing diversity planned.

“I think affordable housing is a key ingredient to a thriving neighborhood,” Lehr said after the meeting. “I think it’s always important to have a different set of levels between high income, middle income and then service or low income.”

Boretz said that while the team is considering a range of affordable to market-rate housing options, it is tough to make that pencil out in the current economy. Beyl said it becomes especially difficult because no urban renewal money will be available.

“That may come back someday, but not within the time we have for this land-use application, that’s for sure,” Beyl said.

He said the team is planning to seek a second design review from the city in early spring.

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Some industry professionals say costs of system development charges in Portland are trending upward, and that the situation is starting to shape the face of their business.

“They’ve been too high and they continue to escalate and the city believes that to fill the gap of lower building permits they’ll just keep raising fees, and it makes it harder for anybody to make anything pencil,” said Robert Black, associate vice president of real estate investment firm .

Black added that SDC costs are increasingly hindering many of the developers he works with.

In 2008, city officials updated the methodology used to create SDCs, which are one-time fees assessed to new developments to cover a portion of the cost to provide services such as parks, transportation and sewer. Since Jan. 1, 2009, the city has adjusted its fees four times, though not always higher.

Riley Whitcomb, manager of the SDC program for Portland Parks and Recreation, said the city increased SDCs in two stages since 2009 to recover 75 percent (up from 25 percent) of growth costs. The fees are adjusted every July to reflect market rates, and the past two adjustments have resulted in slight decreases; they’re not likely to rise again, he said.

But Sam Rodriguez, vice president of development for in Portland, said SDC hikes represent the brunt of a 102 percent increase since 2007 in the amount of municipal fees he must pay to get a project off the ground.

From 2007 to 2011, Rodriguez said he has seen the total price of municipal fees for his projects increase from $6,678 per unit for the Tupelo Alley project in Northwest Portland, to $13,200 per unit for the Savier Street Flats in the Pearl District. While total fees for the 188-unit Tupelo Alley were approximately $1.26 million, total fees for the 179-unit Savier Street Flats were $2.36 million.

Rodriguez said he appreciates that those fees help pay for necessary services, but he said that current levels are doomed to generate at least one unintended consequence.

“The only (project) that you can get financed today is the most expensive – the property that will serve the highest piece of the market, the top crust of the market,” he said. “That represents about 15 to 25 percent of the market that can afford these units.”

That’s because investors today, as a result of recessionary risk adjustments, are interested only in investments able to produce greater yields, Rodriguez said. As project costs climb, so will rent charges for tenants so that profit margins are attractive to investors. And the projects that provide those yields, he said, are upscale multifamily developments.

With developers going after those projects and affordable housing agencies focusing on low-income opportunities, Rodriguez said he believes workforce housing will be shunted.

“The effect is going to be that you’re going to have a flight to the suburbs of that middle bunch, that middle group,” he said. “You’re going to have the top end and the bottom end living downtown and nothing in the middle.”

According to the Portland Housing Bureau, the median family income for a family of four is $73,000, and the maximum rent that family can afford is $1,898. Last fall, the Metro Multifamily Housing Authority said rents in Portland rose 8 percent from the previous year and that the average rent for a two-bedroom, two-bathroom downtown dwelling was $1,585.

Black said he also saw an urban housing hole looming for the middle class and identified SDCs as a primary culprit.

“The city is not being a partner in the stimulation of development,” Black said.

But Nick Fish, a Portland city commissioner, said it is a delicate balancing act when it comes to adjusting SDCs.

“Whenever new units come online, we have to account for the impact on our infrastructure, and if we don’t cover those costs through development, then they are simply shifted to the general fund, which of course is being cut as we speak,” he said.

Fish said SDCs and tax increment dollars from urban renewal districts are the two main funding sources for the parks bureau’s budget.

According to the bureau’s website, Portland is expected to gain 70,000 residents and 100,000 employees by 2020.

“The community has made it very clear they want to see underserved areas addressed, that parks deficient areas get their fair share of parks and green spaces,” Fish said.

Fish also is head of the Portland Housing Bureau and said approximately 15,000 low-income households in the city are underserved by the market. He acknowledged that while numerous programs exist to address that need, fewer programs exist to spur workforce development.

“It is true that it is sort of the stepchild here because it is not housing that we subsidize in the same way we subsidize affordable housing and it is not housing that pencils out the same way as the high-end market housing,” he said.

Robert Ball, principal of , said SDCs clearly play a role in how projects pencil out.

Astor Pacific recently paid $2.5 million in city permitting fees for its 177-unit Parker Apartments building planned in the Pearl District.

Ball said he budgeted for those fees and that he was happy to pay them, so long as they worked for his project.

“It works, but I am up against the line,” he said. “I’m battling the … metrics (that) the people who finance the project look at.”

Ball also said he thought that, with construction costs fairly static, reducing SDC costs would impact development.

“If the costs were lower I think definitely more projects would be built,” he said. “There’s no doubt about that and it would impact our ability to build – any developer’s ability to build – in neighborhoods where rents are less.”

Rodriguez said he would like to see improvements to SDC exemption programs like the Portland Bureau of Transportation’s Transit Oriented Development Property Tax Abatement, which he said is difficult to navigate.

Fish said his door is open.

“I’d be happy to talk to anybody that has a concern,” he said.

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John W. Mitchell, a principal at M & H Economic Consultants, and Sam Rodriguez, vice president of development at , gave keynote addresses on Wednesday at an investor roundtable hosted by at the Multnomah Athletic Club. Also, the $55 million sale of Museum Place (subscription required), a downtown Portland building, was announced during the meeting.

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The developers of the 179-unit apartment complex, Savier Flats, which began construction this month in Northwest Portland, is preparing to double down on their downtown building activities.

is in the early planning stages for a new 140-unit, 143,833-square-foot apartment complex at 2040 S.W. Jefferson St., in the Goose Hollow neighborhood. The building will have six stories above ground and three stories of basement parking.

Sam Rodriguez, vice president of development for Mill Creek, said it is a prime location for such a project.

“It’s in Goose Hollow and we’re looking for properties in markets that haven’t had much development of new apartments,” Rodriguez said. “It’s obviously a very old neighborhood with a tradition of apartment living, it’s close to the core and we believe that right now that’s the most advantageous market that we can be in.”

Rodriguez said Mill Creek plans to market the building to the young professional crowd between the ages of 25 and 35 and is planning the project from a transit-oriented perspective. Located directly across from the MAX light rail blue line, the property will offer residents easy access to the suburbs and downtown, he said.

“If it’s an Intel employee, they can be to work in 20 minutes on the train,” he said. “If it’s downtown, it’s a highly walk-able site.”

While Mill Creek has not yet drafted a firm design for the building, Rodriguez said the majority of it (roughly 92 percent) will be one-bedroom units averaging 700 square feet in size, with the remainder being two-bedroom suites. They plan to market the units for approximately $2 per square foot.

Rodriguez said they also plan to get the building a Leadership in Energy and Environmental Design rating, but they have not yet decided to what extent.

One detail that could potentially delay the planning process is that a portion of the land to be developed is owned by transit agency TriMet.

Rodriguez said the developers are currently in negotiations to purchase this property but that because it is public land, it is subject to the public notification and hearing process. Rodriguez said, however, that initial responses from residents in the Goose Hollow neighborhood had been positive and that developers hope to have final approval from TriMet by February 2012.

If all goes as planned, Mill Creek hopes to begin full design of the building by January 2012 and to send the project out to bid for subcontractor trades by the spring or summer. Rodriguez said they are aiming to break ground by November and that construction will last 17 to 18 months.

The next immediate phase in the planning process will be a pre-application conference, which the project architect, Portland-based , has scheduled for Jan. 4.

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