Developer Mark Edlen discovered he was a candidate to fill the vacancy being left by outgoing Portland Development Commission board chairman Scott Andrews at his going-away party.

That was when Portland Mayor Charlie Hales grabbed Edlen, CEO of Gerding Edlen Development, by his sleeve and asked if he would take the position, Edlen said. He accepted the nomination after discussing the possibility with family, colleagues and four current commissioners.

Edlen, 61, said he considers the opportunity, subject to City Council approval, a way to give back to the community that fueled much of his company’s growth and focus on sustainability.

“I love our city, the political process, the design review process,” he said. “I think we have something very special, especially as I work with more people across the country. I feel the need to give back.”

The addition of Edlen would balance out a board that lost its development voice when Andrews, president of Melvin Mark Properties, stepped down in July, city and commission leaders say. Andrews had served on the commission since 2008 and became chairman in 2009.

“I’m really excited because Mark’s insights into the world of development will be very helpful,” said Tom Kelly, who became commission chairman in June. “He will be the only developer and will provide the insights of a developer as we move forward.”

Edlen said he will focus on creating jobs and a sense of place in neighborhoods such as Lents that have not experienced as much of a building boom as others.

“I strongly believe in the Portland process,” he said. “I love the fact that we have strong neighborhoods, and I believe those neighborhoods belong to people who live there. We should knit ourselves into those neighborhoods and not be opposed to them.”

Edlen also wants to open up opportunities to newer and younger firms that are starting to emerge in Portland.

“I am really impressed with the younger people coming into the business,” he said. “Together, I think we can do cool things.”

No date has been set for the City Council’s vote on Edlen’s appointment, but it is expected to take place in September.

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A geyser of construction activity is about to erupt at the east end of the Burnside Bridge, and one final development is bubbling to the surface.

Hood River-based Key Development is purchasing from the Portland Development Commission the tiny spit of land (Block 76W) on the west side of the Couch Street couplet, and planning to build a two- to three-story commercial building. The firm already is preparing to break ground in August on a 21-story mixed-use tower on Block 67, due west of Block 76W, and other developers are hot on its heels with projects.

PDC commissioners on Wednesday unanimously approved Key Development’s offer for the 8,414-square-foot sister site. Given its small size, sharp slope and the presence of submerged support structures for the Burnside Bridge, the property was not expected to draw an offer.

“When I looked at this plan I never thought that piece of property would get developed,” PDC Board Chairman and Melvin Mark President Scott Andrews said during the hearing. “It’s got a 20 percent slope (and) it’s holding up Couch Street … God bless Key Development.”

Development of the small site wasn’t initially part of Key Development’s plan, principal Jeff Pickhardt acknowledged, but was instead born out of a need to create a stronger pedestrian connection with the bridge.

Key Development’s original plan was to make that connection via Block 67, but Pickhardt said that fizzled when his team learned that the railing on the Burnside Bridge is historically significant – and therefore untouchable. Then, during a design assistance meeting with the city, team members shifted their attention to the grassy island.

“I have to give credit to Skylab (Architecture) in coming up with the design,” Pickhardt said. “They took it upon themselves to create the first run at the design, and then reintroduced it as part of the larger project.”

The proposed 20,000-square-foot building looks like a miniature version of the nearby tower’s podium structure. A large, glass storefront system, triangular frame and green roof suggest a mountain or steep hillside.

The Block 76W development is estimated to cost $6.4 million; Andersen Construction is Key Development’s general contractor for both that project and Block 67.

The PDC is selling the property to Key Development (via Block 76 LLC) for a July 2013 fair market value of $336,000, but the true price will be the cost to perform “extraordinary” geotechnical work – estimated at $361,000. As the development firm pays for that work, the PDC will reimburse it the purchase price.

Key Development also is required to make a $33,600 earnest payment that will be nonrefundable following a 30-day due diligence period. The deal is scheduled to close within 90 days, and the development firm must begin work within three years or the PDC can buy the property back for the original purchase price. The PDC also would gain a 10 percent interest in any resulting sale of the developed site within five years of completion.

Block 76W was the PDC’s last property at the east end of the Burnside Bridge. A planning effort for the bridgehead began some 15 years ago. In 2004, the PDC selected Opus Northwest to develop all of the properties at once; however, that plan dissolved during the recession.

Momentum picked back up in 2009, when the PDC tweaked its framework plan to attract smaller projects in lieu of a larger one. Beam Development got the ball rolling with its redevelopment of the Eastside Exchange building.

Many other projects are planned in the area. Guerrilla Development has a six-story commercial building on tap for Block 76E (the other two-thirds of the block divided by Couch Street); Beam Development and Urban Development Partners are planning a mixed-use project at Block 75 (due north of Block 76); the Seattle office of Texas-based Trinsic Residential Group is preparing to begin a 159-unit mixed-use project on the block due east of Block 76E; and NFN Investments and Arthur Mutal are remodeling the R.J. Templeton Building on the south side of the bridge.

All of those projects are expected to be under way by early 2015.

“We expect that to be a pretty serious construction zone starting in about two months,” said Eric Jacobson, a senior project manager for the PDC.

He added that the tiny commercial building proposed for Block 76W will play an especially important role for the Burnside bridgehead.

“Our design objective was to treat this as a gateway to the entire Burnside Bridge,” he said. “This is – especially for (bicyclists) and pedestrians coming to the bridge – this is the first property they’re going to encounter. So it was really important for us for it to be activated.”

For Pickhardt, the project has been a long time coming. His company has been working on the Burnside bridgehead development since responding to a PDC inquiry in July 2010.

Pickhardt and Jeff Kovel, a Skylab Architecture principal, first presented drawings of the 21-story tower to the Portland Design Commission in April 2013, to mixed reviews. They received the commission’s approval in December.

“It’s been a really interesting project for us,” Pickhardt said. “And it’s certainly rewarding getting to a point where we’re actually ready to come out of the ground.”

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The head of Portland’s economic development agency is stepping down.

Scott Andrews, the board chair of the Portland Development Commission, announced Thursday he will be leaving the commission at the end of his term this July. Andrews, the president of Melvin Mark Properties, joined the five-member commission in 2008, and became board chair a year later.

According to the PDC, Andrews is the second-longest serving board chair behind the PDC’s founding board chair, Ira Keller. During his tenure, Andrews oversaw the completion of numerous developments, including the redevelopment of the Globe Hotel in Old Town Chinatown for the Oregon College of Oriental Medicine, a project for the Portland office of the Federal Bureau of Investigation and the restart of development at the Burnside Bridgehead.

Other projects involved ongoing PDC initiatives such as the Portland Seed Fund, the Neighborhood Prosperity Initiative, the Metro Export Initiative, the Startup PDX Challenge and the Portland Main Streets Program – economic development strategies that offered a helping hand to many small businesses during the recession.

Andrews said he chose to announce his decision now in order to give the city adequate time to appoint a replacement. In the meantime he said he would remain committed to seeing the PDC’s ongoing budget process through to final approval. — Lee Fehrenbacher

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“It feels like the thawing of a long winter.”

Executive Vice President Bart Eberwein and others expressed relief today, when announced that in late 2013 work will resume at Park Avenue West, a downtown Portland high-rise project that stalled more than two years ago.

The scheduled restart date for the project, considered by some people to be a symbol of the recession’s impacts, is based purely on an expectation that large tenants will seek space in late 2015 and early 2016, TMT Development President Vanessa Sturgeon said.

Complete construction financing for the project was procured within the last 90 days, Sturgeon said.

Park Avenue West is planned as a 27-story office and retail building in a prominent location, on a block bounded by Eighth and Ninth avenues and Yamhill and Morrison streets. TMT Development halted the project, estimated to cost more than $100 million, in April 2009 because of financing problems. The big “hole in the ground” has since generated no work except for occasional adjustments of a towering crane that occasionally blows over the neighboring Nordstrom store.

“It’s a symbolic hole in our downtown, and getting this tower under way is a positive sign for everyone,” said Scott Andrews, chairman of the Portland Development Commission’s board and president of . “And alternatives (for leasing) are good for the marketplace.”

Activity is scheduled to take place at the site soon. To make the work-free zone more attractive, crews will soon take down the crane and install an 8-foot-high wall around the site. TMT has partnered with New Avenues for Youth for homeless and at-risk youth, under the direction of an artist, to create a mural.

Meanwhile, the project team will actively seek tenants for the building planned to offer more than 500,000 square feet of Class-A office space. Presently, no lease agreements are signed and no discussions are under way with prospective tenants, according to Sturgeon, but the team believes its opening date is on target because some large corporations and law firms are expected to shop for office space around that time.

“If we target toward that date, we’ll have exactly what they’re looking for,” said principal Scott Madsen, who is marketing Park Avenue West to potential tenants.

Madsen said the project could move forward earlier if tenant interest was to surge at the right time. The project did generate interest from prospective tenants, including law firms and , looking to lease space beginning in 2013 or 2014, but timing for construction didn’t work out for those tenants, and they stayed where they were.

Madsen said he doesn’t expect a big, local tenant to sign before 2015. The team wants to be prepared for that wave, however.

“When we look into our crystal ball … the next wave is happening in the 2015-2016 range. It makes a lot of sense just to prepare for that timeline,” Madsen said.

And in the fourth quarter of 2013, the team will be ready, said founder and principal Robert Thompson, who designed the building.

“There is steel sitting here in Portland, and curtain wall systems in Korea ready to erect,” he said. “The building is ready to go.”

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The Burnside Bridgehead project has picked up momentum … finally.

The Portland Development Commission’s board today approved an agreement with for the company to move forward with the renovation of the historic, 96,000-square-foot Convention Plaza building. The PDC has signed memorandums of understanding with three additional development companies to look into projects on other blocks of the Burnside Bridgehead properties.

Beam officials believe that the agreement with the PDC, along with negotiations with a potential anchor tenant, will allow project construction to move forward in the next six months. Meanwhile, the PDC is hoping that the deal will spur additional development in the area.

Beam Development Director of Operations Jonathan Malsin said previous projects such as the Eastbank Commerce Center and the Olympic Mills Commerce Center serve as good examples of what to expect in the Convention Plaza building. Open-layout creative loft space will be able in sections as small as 400 square feet and as large as an entire floor. The building also will include ground-floor food service spaces, Malsin said.

For tenants, Beam plans to target PDC’s target clusters, which include clean technology, software, and outdoor and apparel businesses. Malsin said that the company is in detailed negotiations with a large tenant in one of the PDC’s clusters to rent 25,000 square feet in the building. That agreement, which is almost finished, Malsin said, is expected to be the last step needed to secure financing for project construction.

A $14.5 million project will involve renovations of the core and shell of the Convention Plaza building, parking lot improvements and the creation of “Couch Plaza” – a landscaped pedestrian area that will use stairs and ramps to bridge a 30-foot elevation difference between Second and Third avenues and connect the building to its parking lot.

According to the most recent appraisal, the property and Convention Plaza building are valued at $2.3 million, though the PDC paid $8.8 million for essentially the same footprint in 2006, PDC Central Eastside URA Manager Steven Shain said.

But the PDC touted the deal during an economic downturn that has hurt the agency’s ability to leverage projects.

“We have struggled to get projects off the ground with 30 to 50 percent leverage,” PDC board Chairman Scott Andrews said. “This is leveraging $14.5 million with $2.3 million.”

The PDC, per the agreement approved this morning, will transfer the property and Convention Plaza building to Beam via a Commercial Property Redevelopment Loan of $2.3 million. Beam will not be required to make payments and interest will not accrue on that loan for five years.

If the development company achieves a set of goals set by the PDC for the building – including development of a pedestrian plaza, addition of a penthouse and agreements with target cluster businesses – it will be able to “buy down” up to 100 percent of the loan, and essentially receive the property and building from the PDC for free. Malsin said that Beam plans to do that by meeting all of the PDC’s goals.

“(The property transfer) is a pretty creative way to put funds towards this project, since we don’t have a lot of remaining revenue in the Central Eastside URA,” PDC spokesman Shawn Uhlman said.

The PDC is hoping to leverage additional investments as well. In an update to the Burnside Bridgehead Citizen Advisory Committee, Shain identified MOUs signed by developers for other portions of the property. According to that letter, Key Development is working to develop concepts for Block 67, developer RXE! Inc. is evaluating the feasibility of a temporary marketplace on part of Block 75, and Block 75 Development LLC – also known as WORK.live – is looking at another part of Block 75 for a live-work concept.

The four-block, four-acre Burnside Bridgehead property was acquired by the PDC for $11 million in a series of deals between 1998 and 2006. The commission initially passed over Beam to sign an MOU with another developer, now-defunct Opus Northwest. Beam was brought on board after Opus Northwest failed, and started work as an unpaid strategic adviser between 2009 and 2010. The PDC guaranteed that Beam would eventually be able to develop at least 20 percent of the site.

The Convention Plaza building and the surrounding property targeted by Beam make up about a third of the bridgehead property. Malsin said that Beam will close on the property with the PDC as soon as the project is permit-ready and the firm can show that construction financing is ready to close. That will likely take place early in the second quarter of 2012, he said.

“In theory, we’ll close on the property on a Monday and start construction the next day,” Malsin said.

The project team includes , , and consultants , , and .

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When McCormick & Schmick’s moved its corporate headquarters from the Portland waterfront to an office building in the Pearl District, the company did not only change its address. It also boosted its image, trading class-B space for a class-A suite in the Pearl while paying the same in monthly rent.

The move reflects what local real estate brokers say is a growing trend they refer to as “flight to quality.” Businesses are choosing to move into higher quality spaces as rents for those spaces continue to drop – and concessions packages continue to be sweetened.

Jeff Borlaug, vice president and director of brokerage with NAI Norris, Beggs & Simpson, has seen the trend before. He said it tends to occur at the end of a rough economic stretch, when some sectors begin to recover.

“We see this happen in most real estate cycles,” he said. “We’re at the brief point right now where business has generally picked up and businesses are feeling a sense of urgency to take advantage of the bottom of the market. But real estate lags the economy, so landlords are still willing to make good deals.”

Average monthly rent for class-A space in the city’s Central Business District is currently $26.21 per square foot. If a business signed a lease six years ago at the peak of the market, it paid approximately $23 per square foot, plus a 3 percent annual increase, for class-A space. That firm would be paying $26.79 per square foot by the end of that lease. With a fair concession package, the business would be paying about the same, if not less, for a higher quality space.

Eric Haskins, vice president of Grubb & Ellis, said the businesses that are taking advantage tend to be locally owned and have matured during the recession. They aren’t necessarily booming, but they do realize they have weathered the economic storm. And these businesses want to lease a space that reflects the quality of their products and services, he said.

Haskins cited the Portland Dermatology Clinic as another example. He recently represented the property when the clinic signed a new lease at the MachineWorks Building, at 1414 N.W. Northrup St. With lower operating costs and several months of free rent, the company ended up paying less per month than at its former class-B space.

Image is a big reason why businesses move to higher quality spaces, but there are other reasons as well. Scott Andrews, president of properties with Melvin Mark Cos., said a better space comes with on-site parking, better security, more amenities and more efficient operations.

“Even if rent is a little higher in a class-A space, the net present value might be better because of lower operating costs and not having to provide additional security or parking reimbursement,” he said. “You have to take that all into account when signing a lease.”

Andrews said a reason this trend might be more apparent than in the past is because the highest quality class A spaces tend to be in the newer green buildings. Businesses want their offices to reflect their employees, and sustainability is a big part of the Portland culture, he said.

Andrews used the SAIF Corporation, an Oregon-based nonprofit workers’ compensation insurance company, as an example. SAIF moved to a class-A space last month at the Crown Plaza Building, at 1500 S.W. First St. The move has spurred an $800,000 energy efficiency retrofit the building owners completed recently.

“It was a high priority for them to get into a green space because that is what the employees wanted,” Andrews said. “The company was very impressed with our sustainability program, but also with the cost savings that came with more efficient operations.”

Currently, the vacancy rate for class-A office space in the CBD is 8 percent, compared to 10.8 percent for all office space in the CBD. Andrews said the trend will persist until the overall vacancy rate for the CBD reaches approximately 6 or 7 percent. Lease rates will go up and a flight to economics will take place, he said. The trend will be reversed and businesses will start downgrading to cheaper spaces.

Borlaug said that while there is definitely a trend, each lease is circumstantial and it really comes down to the value proposition of the space.

“Businesses are willing to pay more for their spaces if they are going to get better performance from the employees and the building,” Borlaug said.

The First & Main Building, for example, offers the newest and most premium space available. Simple logic might suggest that high vacancy rates in the market and high costs associated with moving into a new building would render the space unleasable. But the building is in the mix of existing class-A spaces because of the value proposition associated with occupying a new, efficient building, Borlaug said.

The trend is most noticeable in downtown office space, but it is emerging in other sectors as well.

Haskins said a Beaverton-based research, development and manufacturing firm, Biamp Professional Audio Systems, took advantage of this trend. The company moved from an old warehouse to a new flex space in Beaverton. With a package of concessions, Biamp is paying less on average per month than at its old location.

“The company needed a new space that reflected the quality of its products,” Haskins said. The two spaces differ like night and day, he said.

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The Portland Development Commission board today delayed its decision on where to headquarter its operations. The board, at its meeting on May 12, will decide whether to sign a new lease at its current home, the Mason-Ehrman Building in Old Town, or at the unbuilt Park Avenue West tower.

The board said it wanted additional time to conduct further economic impact analyses of both areas and to provide the public with an opportunity to look over the numbers associated with each proposed lease.

“We want as many critical eyes to look at these numbers as possible,” said Scott Andrews, the chairman of the PDC board. “We’ve come to the decision today that there are just too many loose ends.”

Wednesday’s meeting offered a glimpse into the proposed lease agreements for both buildings. Currently, the PDC pays $1.65 million a year in rent, with $507,474 in operating costs for 68,485 square feet of space. Under a new, 10-year lease offered by the Kalberer Co., owner of the Mason-Ehrman Building, the PDC would pay a base rent of $1.16 million a year and $581,927 in annual operating costs. If the PDC were to sign a 10-year lease with TMT Development, owner of Park Avenue West, the commission would pay $1.25 million in annual rent and $340,261 in annual operating costs for 50,203 square feet of space.

The PDC would be leasing 18,000 fewer square feet at Park Avenue West, and operating costs would be significantly lower because of energy efficiency. Under the lease with the Kalberer Co., the PDC would have the opportunity to sublease one floor of the building, which would result in reduced rent and operating costs.

Andrews told attendees in the packed room that this decision was the most difficult one involving him in his time on the board. He said the PDC is faced with two very distinct issues: spurring economic growth and spending public dollars wisely.

“If I were in the audience today I would want to know what the factors are that are driving this decision,” he said.

The board also will take the next two weeks to confirm that Stoel Rives LLP, the proposed anchor tenant at Park Avenue West, is committed to its lease with TMT if construction were to resume. TMT needs the PDC lease, in addition to the Stoel Rives lease, by June in order to secure financing and restart construction.

“We need to make sure we are the keystone for this project,” he said.

The debate over where the PDC should be headquartered has picked up steam over the past month.

On one side, if the PDC were to sign a lease at Park Avenue West, then Portland could see an economic boost. Resuming construction would create 300 on-site jobs and put 30 steel manufacturers back to work immediately. Also, once Park Avenue West was completed, TMT would pay $1.8 million annually in property taxes.

On the flip side, the PDC’s presence has been instrumental in the growth of Old Town over the past 10 years. Numerous lunch spots, coffee shops and markets have opened in the district since the PDC moved its 185 employees to Old Town in 2001. Plus, a proposal by Seattle-based Uwajimaya Inc. for a large, mixed-use development in Old Town could hinge on the PDC’s decision.

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