Dennis Sackhoff, like other multifamily builders in Portland, is adapting to inclusionary housing rules with a measure of creativity.

City rules, which took effect Feb. 1, 2017, require developers of multifamily buildings with 20 or more units to provide a portion of affordable units (ranging from 8 percent to 20 percent) or pay a fee-in-lieu. Sackhoff’s company, Urban Development Group, has three qualifying projects under way in the Sellwood-Moreland neighborhood in Southeast Portland.

The Sackhoff triangle includes the Yukon Flats, a completed four-story, 54-unit building on Milwaukie Avenue near hip brunch restaurants and a food-cart pod. The building’s apartments are for lease. An Yukon Flats units at rates of $1,175 for a studio and $1,350 for a one-bedroom unit.

Still under construction is a 91-unit building, also four stories, at Southeast 17th Avenue and Tenino Street, next to a sushi restaurant and near a new CVS pharmacy. The project is coming out of the ground, with first-floor framing in place.

Both Yukon Flats and the 91-unit building will have only market-rate apartments. The reason that works is because a third planned building, at 1645 S.E. Nehalem St., will include a greater-than-required ratio of affordable units via an off-site transfer. However, while the lot at that address is fenced off, no work has begun.

Sackhoff’s strategy will mean 145 market-rate units will be ready for lease before any rent-restricted affordable units become available. The delay in affordable housing construction meets the Portland Housing Bureau‘s rules, an agency spokeswoman stated.

The arrangement meets the procedures for an off-site transfer, Housing Bureau spokeswoman Martha Calhoon stated.

“Under the off-site transfer option, receiving sites are required to meet reasonable equivalency standards, and must be located either within a half-mile of the sending site or in an area with the same opportunity score (or higher) as the sending site,” Calhoon wrote in an email. “Opportunity scores are based on the services and amenities in an area so, yes, we would say that off-site transfers like the (Sackhoff projects) are accomplishing the program goals of creating more affordable housing in walkable neighborhoods near active transportation, employment centers, open spaces, high-quality schools, and various other amenities that enhance quality of life for residents.”

Sackhoff did not respond to requests for comment through David Mullens, project manager for Urban Development Group.

The number of rent-restricted affordable units that will be built at the Nehalem Street property may be in flux. Previously, the proposal was for 58 total units in four stories. Then on March 3 the developer submitted a new permit application to add a fifth floor, which would expand the project to 75 total units.

Of those original 58 units, 31 were required to be affordable to renters earning no more than 60 percent of area median income and nine units were to be affordable to renters at no more than 80 percent of area median income. The remaining 18 units would be market-rate.

With the developer’s request to add 17 units, the Housing Bureau may require a percentage of those to be affordable. The construction type would change to III-B – potentially a brick or block base with a wooden roof.

The Housing Bureau plans to conduct a market analysis to recalibrate inclusionary housing’s off-site program options to “increase flexibility and utilization,” according to the bureau’s inclusionary housing website.

A different approach

Another developer active in Sellwood-Moreland is trying an entirely different approach. Native Land Development has two multifamily projects under construction in the neighborhood: one with 28 units at 5434 S.E. Milwaukie Ave. and the other with 30 units at 5605 S.E. Milwaukie Ave.

The two projects are 100 percent affordable. All 58 units are studio apartments dedicated to inclusionary housing. Rents are $924.

The 30-unit building, while modest in size, will have the most inclusionary housing units of any building in Portland, according to a Housing Bureau tally.

“There is a lot of hype on it being super difficult to build with (inclusionary housing), but it depends on your style, how you run and your stakeholders,” said Austin Turner, a Portland development consultant who is working with Native Land.

The developer has received more than 100 rental applications for the 28 units at the first project, Turner said.

The projects are made possible via a series of public subsidies. Among them: system-development charge waivers and a 10-year property-tax exemption.

Native Land also found contractors willing to compromise on price.

“We asked people to take discounted rates to make it happen,” said Rowen Rystadt, a project manager with Native Land.

The projects were designed by Ralph Tahran, a Lake Oswego architect who was a co-founder of Otak Inc.

“I think everyone is working toward the right goal, which is increased density in these areas,” Rystadt said.

Native Land Development started in Centralia, Washington, with a focus on building affordable housing on American Indian reservations, Rystadt said. The company is led by Leah Wells-Swanson of West Linn.

Fee-in-lieu

Another inclusionary housing option allows developers to pay a fee into the Housing Bureau’s inclusionary housing fund instead of building affordable units. Developers for projects that vested before inclusionary housing took effect can also opt in to inclusionary housing to receive bonus floor-area ratio, which allows larger buildings to be built.

So far, developers of 10 properties have paid fees in lieu totaling $410,698, according to the Housing Bureau. Each opted in to inclusionary housing voluntarily to receive bonus FAR, Calhoon stated. The largest payment to date – $175,810 – came on behalf of a five-story, 88-unit hostel project at East Burnside Street and Southeast 16th^Ěý Avenue.

To date, no project team has opted to pay the fee-in-lieu instead of providing units, Calhoon stated. But developer BPM Real Estate Group is expected to do so for the 35-story mixed-use tower now under construction on Block 216 in downtown.

The fee-in-lieu payment will be triggered by issuance of a commercial building permit. Based on prior information provided by the project team, the fee for Block 216 is expected to be approximately $7 million to $8 million, stated Ken Ray, a Bureau of Development Services spokesman.

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Berkshire Group, a Boston investment company, has purchased the Lower Burnside Lofts apartment building for $18.5 million, ARA Newmark announced Tuesday.

The owner was developer Urban Asset Advisors, which completed the six-story, 63-unit project in June 2015. It was designed by Vallaster Corl Architects, built by Bremik Construction and financed by Banner Bank.

The sale price equates to $521 per square foot. The sale was brokered by ARA Newmark’s Portland office.

Lower Burnside Lofts, at 60 S.E. 10th Ave., is in a Southeast Portland area that is attracting redevelopment. Restaurants such as Le Pigeon, Noble Rot and Burnside Brewing have added amenities to the area.

Lower Burnside Lofts was fully leased by August, according to ARA Newmark.

Only a block away, at 1111 S.E. Sandy Blvd., Urban Development Group of Beaverton is moving forward with Burnside Delta. It’s expected to have 85 residential units and 2,500 square feet of ground-floor retail space.

“The most appealing thing to the lower Burnside neighborhood is it’s sort of at that doorstep to downtown,” said Robert Black, managing director of ARA Newmark’s Portland office. “It’s got great access, either by car or by bike.”

Newer neighborhood tenants are mixing with long-established manufacturing businesses.

Lower Burnside is “having a real sort of resurgence, especially in the creative office world,” Black said. “It’s got a lot of the factors that these millennials – young, well-educated creatives – are looking for.”

The multifamily market continues to see steady development, with about 5,000 units expected to go online this year in the Portland area, and a similar number in 2017, Black said.

“I see this continuing,” he said.

With rents rising in the suburbs, more projects are being planned in submarkets such as Washington County, along with steady multifamily-unit deliveries in Portland’s urban core, Black said.

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Urban Development Group of Beaverton is moving forward with plans to construct a six-story mixed-use building in Portland at East Burnside Street and Southeast Sandy Boulevard.

Burnside Delta is designed to offer 85 residential units and 2,500 square feet of ground-floor retail space at 1111 S.E. Sandy Blvd. The building site is a triangular block occupied by a large billboard and parking lot. A small restaurant, Michael’s Italian Beef and Sausage Co., is expected to remain.

The ground level would also have 18 vehicle parking spaces and 56 bicycle parking spaces. The building would have a basement level, and feature exterior balconies and a roof deck.

The project is scheduled to return to design review on March 17; an initial hearing was held Feb. 4. Vallaster Corl Architects of Portland is designing the building.

Bureau of Development Services staff, in a Jan. 22 report, recommended project plans be denied. Among other issues, the staff report said the applicant, David Mullens of Urban Development Group, had not provided enough information about the building’s proposed use of tread-plate steel exterior cladding.

BDS staff also recommended more arcade features be included to provide greater protection to pedestrians and to help the building fit in among others in the area.

Mullens and Urban Development Group owner Dennis Sackhoff could not be reached for comment. Sackhoff is also president and CEO of Arbor Custom Homes in Beaverton.

The project’s architect said Burnside Delta should be able to move forward.

“We’ve just got to get the arcade thing sorted out, and then it’s ready to go in terms of putting together the working drawings,” architect Don Vallaster said.

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Pearl District developer Hoyt Street Properties is pushing forward its proposal for a 20-story condominium tower in Northwest Portland. The firm recently issued a request for design advice.

Plans for the high-rise call for 142 condominiums and above-grade parking. The project is planned for a full block bordered by Northwest 11th and 12th avenues, and Pettygrove and Quimby streets.

Block 20, as the project is known, would have a five-floor podium and a 20-floor tower. Retail space is not envisioned.

Hoyt Street Properties has been a leading developer in the Pearl, partnering with Boora Architects on projects such as Cosmopolitan on the Park, The Encore and The Metropolitan. Only eight Cosmopolitan units remain to be sold, Hoyt Street Properties President Tiffany Schweitzer said.

“It sold incredibly well, and we would like to keep that momentum going for the next project,” she said. “There’s not a lot of new, for-sale product on the market.”

Condominium sales took a hard hit during the recession, but developers have recently begun investing again.

Project backers hope to meet with city officials for design advice sometime this spring.

Also included in the city’s public notices issued Monday:

A developer is planning to build a mixed-use building with 46 apartments and 2,700 square feet of commercial space at 4917 S.E. Hawthorne Blvd. The location is within blocks of trendy restaurants such as Por Que No? and Apizza Scholls.

The owner is listed as Gretchen Malmberg. David Mullens of Urban Development Group is the applicant. Attempts to reach them for comment were not successful.

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After a period of relative silence, a developer has broken ground for a mixed-use building next to the Hollywood Theatre in Northeast Portland.

Hollywood District business owners and historic preservationists had concerns about the project, which was proposed to include approximately 52 apartment units and no parking. A project manager said the team was concerned about a prolonged design review process, and chose to use a different process so it could build without facing potentially costly and delay-inducing appeals.

Construction of the Hollywood Apartments has “just started,” according to Creston Homes project manager David Mullens. The building, due to be completed in 14 months, will include 47 one- and two-bedroom apartments and 3,500 square feet of ground-floor retail space, Mullens said. The owner of the project is Hollywood Apartments LLC, part of , which also owns Creston Homes.

In May, the by Hollywood Theatre Executive Director Doug Whyte, who expressed concern that the new apartment building could hinder visibility of the theater’s historic marquee, particularly for people traveling on Sandy Boulevard.

Representatives of the building’s designer, , met with Hollywood Theatre and neighborhood stakeholders a few times, but those conversations stopped last spring. That’s because the project team decided to take a different avenue to secure design approval, Mullens said.

The project proposed in May called for 52 units, enough to require a loading dock, according to city code; the team was seeking a variance for that requirement. The design, as it was, also varied from design guidelines for aspects like cornices and height, Mullens said.

The team discovered that it could make changes to make the project fit “Community Design Guidelines” – an “objective set of standards,” said Bureau of Development Services spokesman Ross Caron. Those standards can substitute for design commission review in some of Portland’s design overlay zones, including the Hollywood District, Caron said. And unlike the design review process, the community design process does not allow for public appeals.

Mullens said he can’t remember exactly when the team decided to use Community Design Guidelines.

“It had a lot to do with the fact that anyone in the neighborhood could file an appeal of any decision (of the design commission), for a small fee,” he said.

Such appeals, Mullens noted, could have derailed the project.

The commission’s design review process also could have been longer, he said. And that would have made a huge difference because city building permit fees increased on July 1. Because the team applied before fees increased, Mullens estimates that it saved $56,000. The permit for construction was issued Nov. 17.

Whyte and representatives of the Hollywood Theatre stopped meeting with the apartment designers once they started pursuing the alternate review process. Whyte has not seen an updated design.

“I would have liked it if we had been in communication through the whole process,” he said.

However, Whyte did say that the theater’s major concern – visibility of the marquee – seemed to be addressed in the new design. He said he heard that the new building will “step back” from the curb near the theater, so that views will be preserved.

Whyte also said he is glad something is being developed on the long-vacant property adjacent to the theater.

“We want to work with them to see if they can get something really cool into a retail space, like a restaurant that will both benefit the theater and the restaurant,” Whyte said. “The lot has been empty for so many years; it will be nice to have some life and activity there.”

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A former retail building in Northeast Portland is being renovated to become the Windows on MLK mixed-use project, a four-story structure with 3,500 square feet of ground-level retail space and eight apartments on the upper three levels. Lorentz Bruun Co. is the general contractor and Larry Abell is the architect for the project for the Urban Development Group. Completion is scheduled for fall.

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