Portland Real Estate Market thread

[bvpcvm]

http://www.oregonlive.com/business/index.ssf/2008/10/portlands_condo_craze_comes_to.html

Portland's condo craze comes to screeching halt

by Ryan Frank, The Oregonian Thursday October 09, 2008, 7:20 PM




STEPHANIE YAO/THE OREGONIAN

The Waterfront Pearl boasts rare riverfront real estate and a sweeping view of the Fremont Bridge. But broker Edwina Feeney said the financial meltdown and election worries mean her 76 sales are far slower than she expected for the 194-unit building. But she added: "I don't think we're doing any worse than anyone else."

Portland's once-thriving condo market reached new depths in the third quarter amid the worldwide financial crisis.

The young professionals and empty-nesters who once powered the downtown condo construction boom have gone missing. Prices are falling, but potential buyers face more trouble securing mortgages for new purchases or selling their old homes to cash out their equity.

Portland's condo market remains far better than places such as Miami and Las Vegas that saw even more feverish condo building. But Portland condo brokers, who six months ago sounded upbeat tones, now publicly acknowledge the first significant downturn since the condo market took off in the late 1990s.

To cope, developers have restructured their loans to buy more time or converted their towers into luxury apartments. Even with 1,400 condos pulled from the supply for rent as apartments, the downtown market remains flooded.

Realty Trust City, Portland's leading firm in new condo sales, reports 884 new units available in central city towers. Based on an average of 14 sales a month over the third quarter, downtown has enough to feed current market demand for an astounding five years. That's about six times the duration of inventory for all Portland-area homes at their current rate of demand.

For the first time in years, no cranes are spinning over a future condo tower on Portland's skyline. All remaining cranes are helping to sprout offices or apartments.

Patrick Clark, a Realty Trust City principal, expects one or two more condo buildings to convert to apartments and, after the worst of the crisis passes, condo sales to pick up. He estimated that the current condo surplus will sell out within 18 to 24 months.

"It's hard to tell when the current financial markets will resolve themselves," he said.

The slowdown's pain is harshest for buildings that started construction at the 2006-07 peak of the housing boom and are finishing amid a historic Wall Street meltdown. The developers' equity investors will be the first to lose money. In the worst-case scenario, developers could be forced to turn keys over to their banks.

In a report last month, Wells Fargo economist Ed Kashmarek said Portland's condo developers hadn't panicked yet.

"But that's primarily because many projects haven't been completed," he wrote. "Once they are completed and the interest reserve runs out, they will need to pay interest on their loans out of their own pockets and at that time they will likely lower their prices to attract buyers. Until then, prices may not drop much.

"Prices may have to come down 10 to 15 percent or more, maybe even up to 40 percent, in order to move inventory."

The Westerly in Northwest Portland and The Strand on the Willamette River both advertise reduced prices.

On the waterfront

At South Waterfront's John Ross, prices are discounted nearly 10 percent, said Clark, whose firm is selling the building.

The 31-story John Ross, once symbol of the condo craze, provides a stark example of the market's struggles.

Portland's two most prominent developers -- Gerding Edlen Development and Williams & Dame Development -- partnered on the futuristic building. In 2005, 222 potential buyers put down deposits on condos in the first week of sales.

By October 2007, buyers held only 192 condos, because some sales had fallen apart.

This month, Clark said the John Ross' figure stands at 185.

Gerding Edlen and Williams & Dame have refinanced their loans on the John Ross and, next door, Atwater Place to buy more time.

Room in the Pearl

In the Pearl District, Hoyt Street Properties continues to struggle to sell its latest tower, the 177-unit Encore.

Company President Tiffany Sweitzer told the Daily Journal of Commerce in September that she had seven sales. That's less than the 12 sales she said the Encore had in April. Sweitzer did not return calls from The Oregonian this week.

Nearby, cost overruns and crisis fallout dog the glassy Waterfront Pearl.
The riverfront project's cost increased 12 percent to $93 million partly because of flooding during high water. Pemcor Development of Vancouver, B.C., is seeking more from lenders to cover the costs. But President Paul Mayer said the financial crisis has gummed up his request.

His general contractor, Hoffman Construction Co., has filed a foreclosure lawsuit seeking $10 million in unpaid bills. Without a solution, Hoffman could end up taking possession. "We're still working toward it, and I think we'll get it taken care of," Mayer said.

Broker Edwina Feeney had hoped to sell all of Waterfront Pearl's 194 condos by now. "At this point, I thought I'd be on an island," Feeney said.

So far, she's sold about 40 percent of the building, and she expects she'll need another 18 months to finish.

Meantime, she tries to look at the positives. She recently sold a penthouse condo to a surgeon for $2.8 million. "That to me," Feeney said, "is like three or four sales."

[bvpcvm]

it occurred to me that, if this downturn really turns into a "new great depression", it could pretty severely impact our expectations of population growth around here. after all, people don't come here for the job market; they come here for the lifestyle and work in coffee shops until they find something better. but that may not be quite as viable if jobs all around are hurting; people will stay where they are rather than risking a move.

[zilfondel]

^ or people will be stupid and move here after being laid off somewhere else, as its cheaper than California.

Hmm... sounds familiar, dont it? I somehow doubt there will be much change, as you can always add another roommate to a rented house or apartment. I have noticed that it is now more common for people to share 1-bedroom or even studio apartments with roommates...

[NJD]

Portland vs. Seattle: A tale of two cities
Unico president says that while Seattle battles self-interest, Portland simply gets things done

DJC POSTED: 04:00 AM PDT Monday, October 20, 2008
BY SAM BENNETT

As president of Unico Properties, Dale Sperling is expected to look at the big picture.

But to understand the market forces affecting commercial real estate, Sperling said he thinks beyond the numbers.

“To be successful in the real estate business, you have to understand sociology, psychology and demographics,” said Sperling. “The real estate business is not just about creating pro forma forecasts. It’s about understanding how the world works.”

Speaking at the Commercial Association of Realtors quarterly meeting last week, Sperling said “These are the best of times and the worst of times” for the Northwest economy and commercial real estate. “The past few months have been an energizing time for me. There are opportunities for those of us with patience.”

Sperling titled his presentation after Dickens’ novel “A Tale of Two Cities,” referring to the Portland and Seattle real estate markets. He noted that Seattle has 8 million square feet of commercial space under construction, compared with 2 million square feet in Portland. Unico owns and manages properties in both cities, including the new Lovejoy in the Pearl District and partial ownership of U.S. Bancorp Tower.

John Mitchell, an economist and owner of M&H Consultants of Lake Oswego, said Oregon’s major cities are seeing rising unemployment and the state’s forestry industry is being hit by the housing market crash. At the same time, Seattle has been hurt by the collapse of Washington Mutual and, more recently, the ongoing machinists’ strike at Boeing.

Sperling said office vacancies in both cities are around 10 percent, but that’s where the similarities end. As home base to large corporations such as Microsoft, Starbucks, Amazon and the Gates Foundation, the Seattle area has thrived in good times.

“Seattle has a long tradition of booms and busts,” he said. “But it has a more dysfunctional political environment. Portland’s leaders have a more coherent vision of what they want and are more tolerant and experimental with civic issues. Portland has a culture of community versus a culture of self-interest in Seattle.”

Seattle’s political fighting dates back to its early founders William Bell, Arthur Denny and Carson Boren, who couldn’t agree on how to lay out the downtown streets. Fast-forward to 2008 and Seattle’s political leaders are mulling over more than half a dozen options for replacing the Alaskan Way Viaduct – seven and a half years after an earthquake rattled the waterfront thoroughfare.

Next year, Seattle will get its first light-rail connection from downtown to Sea-Tac International Airport. But Sperling said that comes 13 years after voters approved the line.

“Seattle cannot seem to figure out any compromise or solutions to traffic and congestion,” he said. “Seattle has seven independent transit agencies. Its nine-member city council is in need of adult supervision.”

While Microsoft, Amazon and Costco have created “unimaginable wealth and philanthropy,” Sperling said Seattle’s billionaires spend more time on the world stage than locally, referring to Bill Gates speaking at the World Economic Forum this year in Davos, Switzerland.

“The downside of wealth is it removes leaders from the texture and context of their communities, and it takes them to Davos instead of the (Greater) Seattle Chamber of Commerce.”

Comparing the Pearl District with Seattle’s South Lake Union neighborhood, Sperling said billionaire Paul Allen, who owns large chunks of South Lake Union, was unable to rally the city around his vision to build a 61-acre park and provide an infusion of new development to the area. Voters rejected the proposal in 1995.

“Portland has a diverse, yet cohesive community of developers (who created the Pearl), versus a single developer (Allen) who could not rally the community around his vision,” he said. “It feels like the Pearl was transformed overnight into a wonderful, vibrant and rich community of new and old buildings, with condos, apartments and parks. It’s got it all.”

But Sperling, who is based in Seattle but has lived in both cities, said he is bullish in the long term concerning the commercial real estate markets of Portland and Seattle. “We will stick around for the rebound,” he said.

[Leo]

Some information about sale percentages in some of our favorite new construction condo towers:

http://agent503.com/2008/10/24/new-construction-condos-adjust-pricing/

I don’t know how accurate the information on that website is, but it is encouraging that some developers are finally beginning to cut prices in order to sell units. If they cut enough, they may even be able to fill some of these towers with residents.

[sowat]

Portland still 10% overvalued, even with 4.5% mortgage interest rates??

(another RE valuation post if no one objects)
http://quicktake.morningstar.com/Stocknet/san.aspx?id=267414

Treasury's Rumored 4.5% Rate Plan
by Eric Landry | 12-05-08

A program where the U.S. Treasury will make 4.5% conforming mortgage financing available to homebuyers, which was reported by various sources on Thursday, will have large ramifications for the housing market. As it stands, Case-Shiller data indicates affordability is already nearing historical averages with rates at the current 5.75% level. If and when 30-year rates fall an additional 125 basis points, affordability improves to levels not seen in years.

To gauge affordability, our model compares the percentage of annual income a median-income earner would have to fork over to service the mortgage payment on a newly purchased median-priced house to historical averages. We assume a steady downpayment and use mortgage rates in force during each quarterly period over the 20-plus year study. If the current ratio of mortgage payment-to-income is materially above the 20-year average, that market is deemed overvalued.

Of the 20 cities measured by Case-Shiller, six (Portland, New York, Boston, Los Angeles, Seattle, and Chicago) still showed some degree of material overvaluation as of September when mortgage rates were 6%. Using today's rate of around 5.75% and September prices (which are undoubtedly lower today), that number falls to three cities, with Portland, New York, and Boston being the only remaining materially overvalued cities in the study. When we use a 4.5% mortgage rate in our model, only one city is just slightly overvalued (Portland, by less than 10%), while several fall into the highly affordable category. For instance, former highly overvalued hotspots such as Phoenix, Tampa, Las Vegas, and San Diego would all be materially undervalued based upon historical ratios of income to mortgage payments if the Treasury were to enact its rumored plan.

We do see some potential problems, however, as thoughts of a revived housing market may motivate those who had given up on selling their homes to try again. The resulting increased supply's effect on an already glutted market wouldn't be beneficial. And while lower rates may help clear up the current glut, it may just postpone the problem by pulling demand forward. Consequently, the market may be in for more problems once the program inevitably ends.

[MarkDaMan]

Unico Properties looks to roll out multifamily, prefab housing in Northwest
Company is presently focusing on Seattle, but will eventually push its sustainably-built units in Portland when the market shifts
Daily Journal of Commerce
POSTED: 04:00 AM PST Monday, November 10, 2008
BY SAM BENNETT

Jonas Sylvester believes there is a potentially strong market for sustainably built, prefabricated housing in Portland. It’s all a matter of timing.

“We see Portland as a fantastic market,” said Sylvester, vice president of investments for Unico Properties. “But the Portland market has a little more (apartment) vacancy and excess supply to work through.”

The excess supply, caused by the economic slowdown, the housing collapse and the emergence of condo conversions to the market, means that Unico will take a wait-and-see approach to rolling out its first multifamily, modular housing developments in Portland.

But Unico will begin construction on a prefab housing development next month in Seattle. The 66-unit development will be near Lake Union, Sylvester said. The Seattle-based company has two other Seattle sites planned for additional prefab housing.

Unico owns and manages commercial properties in Portland and Seattle, including Portland’s new Lovejoy in the Pearl District and partial ownership of U.S. Bancorp Tower.

A prototype of the prefab modular units, called “Inhabit,” was on display in downtown Seattle on the Rainier Square roof park last year.

Unico President Dale Sperling said the units offer an eco-friendly alternative to market-rate housing.

“We have a unique opportunity to change the economic, environmental and social factors of multifamily real estate,” he said. “Modular construction fits with our vision to use sustainable business practices to create healthier communities.”

Unico worked with two architecture firms on the apartments – Mithun and Hybrid Architecture of Seattle – to create the Inhabit prefab apartments. The units were built by Guerdon Enterprises and the interior design was by Vision Art of Seattle.

Sperling said Unico will aim for LEED certification for the new development. The wood-framed Inhabit units will have double-paned, energy-efficient windows and flooring that uses less first-generation wood. In addition, they will have energy-efficient heat pumps and dual-flush toilets. Decking will be made from recycled plastic and cellulose, and flat roofs will accommodate a green roof system to reduce storm-water run-off.

Sylvester said tenants will appreciate that the units are eco-friendly yet affordable.

He added that the company can achieve greater cost savings as more of the Inhabit units are rolled out.

Sylvester said Unico will work “within existing zoning” in both cities to obtain approval for the developments.

Terry Whitehill, the plan review section manager for the city of Portland, said the city would inspect the modular housing for compliance in the areas of the foundation, plumbing and how the units are connected. In addition, a state inspector would handle the inspection of the units at the factory, Whitehill said.

Sylvester said Inhabit will represent the first multifamily developments of prefab housing in the Northwest. “The concept of multifamily prefabricated units is very new in the U.S.,” he said.

Potential renters in Portland, he said, are “savvy about being environmentally conscious.” But Unico is holding off, for now, on entering the Portland market. “We want to get through a number of Seattle projects first, and wait for a more opportune time in Portland,” he said.

http://www.djcoregon.com/articleDetail.h...nico-will-hold-off-on-plans-to-bring-pre

[sowat]

Portland home prices tumble 16 percent from peak
by Ryan Frank, The Oregonian
Thursday January 15, 2009
http://www.oregonlive.com/news/index.ssf/2009/01/portland_home_prices_tumble_16.html

[Leo]

Some good news for renters: http://finance.yahoo.com/real-estate/article/106480/Rents-Drop-Nationwide-as-Vacancies-Spike

20% rent drops in Manhattan – Now that’s crazy. Luxury new constructions were the hardest hit in Manhattan; my guess is they will offer the biggest price cuts in Portland as well, eventually.

Portland has the #6 biggest rent drop with a mere 3.2% decrease, so far. Doesn’t look like the conventional wisdom of higher rents due to fewer home buyers is going to pan out...


Rents Drop Nationwide as Vacancies Spike
by Prashant Gopal
Friday, January 23, 2009
provided by BusinessWeek


The economic crisis has opened up opportunities for apartment tenants. The inventory of vacant apartments is expanding, and rents are dropping quickly in major metros across the country.

For renters with leases about to expire, it's time to negotiate. Landlords are working extra hard these days to keep units filled.

Of course, your ability to hold on to an apartment—especially a luxury unit—depends on how secure you feel about your own job. Americans lost about 2.6 million jobs in 2008 (mostly in the final quarter of the year) and are likely to lose millions more this year. They are losing money on stocks and other investments and are cutting back on costs by downsizing and moving in with family members or roommates as they hunker down for a deep recession.

Landlords, as a result, are forced to offer discounts to fill vacancies. Apartment vacancies spiked in September after the collapse of Lehman Brothers and the eruption of the financial crisis.

Go for a Long Lease

"If you've got job, it's a great time to be a renter and to sign the longest lease possible," said Ron Johnsey, president of Axiometrics.com, a Dallas apartment data company.

BusinessWeek.com worked with Axiometrics to come up with a list of 25 large metros where rent declines accelerated most at the end of 2008. In Salt Lake City, where the economy had been holding up better than most cities, effective rents (including landlord concessions) fell 2.3% in the fourth quarter compared with the previous quarter. By comparison, rents were climbing 3.3% in the fourth quarter of 2007.

The New York metro area, including New York City and its New York and northern New Jersey suburbs, saw a 3.7% drop-off in effective rents in the fourth quarter (compared with a 0.5% increase in the fourth quarter of 2007), according to Axiometrics, which surveys landlords across the nation once a month.

The situation has changed dramatically in the expensive Manhattan market, where tenants are suddenly in control. The layoffs on Wall Street have forced landlords to cut rents; offer one, two, or even three months' free rent; and pay the broker fee that the tenant would otherwise pay (often 12% of the annual rent).

Luxury High-Rises Hard Hit

Vacancies are rising most in the high-end doorman buildings, particularly in the Financial District, said Daniel Baum, chief operating officer for the Real Estate Group NY, a residential sales and rental brokerage firm. But rents are falling all across Manhattan, in all price categories, he said. Some landlords have dropped rents as much as 20% to lure tenants, he said.

"The luxury high-rise market, especially new construction, is the one taking the worst hit," Baum said. "There's a building offering three months' free rent in the Financial District."

Victor Calanog, chief economist for apartment research firm Reis said landlords nationwide are more motivated to cut rents than they were after the previous recession at the beginning of this decade. Landlords now are under pressure to keep tenants because vacancies are higher than they were in 2000 and so are the debt payments they need to cover. Too many vacancies, and some landlords are likely to face foreclosure, he said.

"I've never seen this kind of acceleration in decline," Calanog said. "It's somewhat sobering."

Metros With the Biggest Rent Drops

Salt Lake City

Rank: 1
Rent drop: -5.7%
Q4 2008 rent change: -2.3%
Q4 2007 rent change: 3.3%
Effective rent: $810.30

Salt Lake City, Utah's capital and seat of the Church of Jesus Christ of Latter-Day Saints, saw a large slide in apartment rents during the fourth quarter. The slowing real estate market has hurt the job market in construction and housing, though employment remains relatively tight. The unemployment rate climbed to 3.4% in November 2008 compared to 2.6% in November 2007. The apartment vacancy rate jumped to 6.8% in the fourth quarter last year from 3.1% in the same period in 2007. Landlords on average are giving 2.2-week rent concessions.

Nassau-Suffolk (Long Island, N.Y.)

Rank: 2
Rent drop: -4.7%
Q4 2008 rent change: -3.2%
Q4 2007 rent change: 1.5%
Effective rent: $1,786.60

Apartment rents in Long Island's suburban counties have dropped as Wall Street layoffs and tumbling home prices have taken a toll on the economy. The unemployment rate climbed to 5.2% in November 2008 compared to 3.7% in November 2007. The apartment vacancy rate fell to 3.1% in the fourth quarter last year from 4.3% in the same period in 2007. Landlords on average are giving 1.3 weeks of rent concessions.

Raleigh-Cary, N.C.

Rank: 3
Rent drop: -4.0%
Q4 2008 rent change: -4.4%
Q4 2007 rent change: -0.4%
Effective rent: $752.70

Raleigh, the state capital and home of North Carolina State University, has been somewhat buffered from the recession until recently, in part because of its university, health-care, and government jobs. But apartment rents are falling as problems in the larger economy take their toll. The unemployment rate in the Raleigh-Cary metro area climbed to 6.1% in November 2008 compared to 3.5% in November 2007. The apartment vacancy rate jumped to 6.8% in the fourth quarter last year from 5.3% in the same period in 2007. Landlords on average are giving 3.1-week rent concessions.

New York-Wayne-White Plains, N.Y./N.J.

Rank: 4
Rent drop: -3.7%
Q4 2008 rent change: -3.2%
Q4 2007 rent change: 0.5%
Effective rent: $2,672.20

The New York-Wayne-White Plains metro area is a vast area that includes New York City and the suburbs of northern New Jersey and Westchester County. Rents, along with home prices, had been growing in Manhattan until the financial crisis took hold in mid-September. Since then, rents have dropped as landlords adjust to the new reality. Major layoffs at financial firms and in other sectors have forced tenants to give up expensive apartments and move in with parents or roommates. The unemployment rate climbed to 6% in November 2008 compared to 4.6% in November 2007. The apartment vacancy rate jumped to 4% in the fourth quarter last year from 3.4% in the same period in 2007. Landlords on average are giving rent concessions of 1.1 weeks.

Seattle-Bellevue-Everett, Wash.

Rank: 5
Rent drop: -3.5%
Q4 2008 rent change: -3.8%
Q4 2007 rent change: -0.3%
Effective rent: $1,161.60

Seattle, home of Boeing and Microsoft, has seen its apartment rents fall as the economy falters. The unemployment rate climbed to 5.6% in November 2008 compared to 3.7% in November 2007. The apartment vacancy rate jumped to 6% in the fourth quarter last year from 5.1% in the same period in 2007. Landlords on average are giving rent concessions of 1.8 weeks.

Portland-Vancouver-Beaverton, Ore./Wash.

Rank: 6
Rent drop: -3.2%
Q4 2008 rent change: -2.8%
Q4 2007 rent change: 0.4%
Effective rent: $850.40


The Portland area, known for its environmental consciousness, microbrew beer, and cultural offerings, has seen manufacturing layoffs spike in the last several months. The unemployment rate climbed to 7.2% in November 2008 compared to 4.7% in November 2007. The apartment vacancy rate jumped to 5.8% in the fourth quarter last year from 4.6% in the same period in 2007. Landlords on average are giving rent concessions of two weeks.

San Jose-Sunnyvale-Santa Clara, Calif.

Rank: 7
Rent drop: -3.0%
Q4 2008 rent change: -3.0%
Q4 2007 rent change: 0.0%
Effective rent: $1,788

Silicon Valley, the nation's technology capital, is suffering from layoffs and dimming economic prospects as the recession deepens. The unemployment rate in the San Jose metro area climbed to 7.2% in November 2008 compared to 4.9% in November 2007. The apartment vacancy rate jumped to 4.2% in the fourth quarter last year from 3.5% in the same period in 2007. Landlords on average are giving rent concessions of one week.

Charlotte-Gastonia-Concord, N.C.

Rank: 8
Rent drop: -2.9%
Q4 2008 rent change: -3.8%
Q4 2007 rent change: -0.9%
Effective rent: $736.40

The recession struck the Charlotte area later than it did much of the country, but the banking center is now getting hit. Layoffs are accelerating in and around Charlotte, home of Wachovia and Bank of America. The unemployment rate jumped to 8.1% in November 2008 compared to 4.8% in November 2007. The apartment vacancy rate jumped to 8.5% in the fourth quarter last year from 6.3% in the same period in 2007. Landlords on average are giving 3.1 weeks of rent concessions.

Oakland-Fremont-Hayward, Calif.

Rank: 9
Rent drop: -2.9%
Q4 2008 rent change: -2.1%
Q4 2007 rent change: 0.8%
Effective rent: $1,515.40

In the Oakland area, located across the bay from San Francisco, economic troubles have only gotten worse with the financial crisis. But it has also seen a rising tide of foreclosures. The unemployment rate in the area climbed to 7.2% in November 2008 compared to 4.9% in November 2007. The apartment vacancy rate jumped to 4.6% in the fourth quarter last year from 3.9% in the same period in 2007. Landlords on average are giving 1.4 weeks of rent concessions.

Boston-Cambridge-Quincy, Mass.

Rank: 10
Rent drop: -2.8%
Q4 2008 rent change: -2.4%
Q4 2007 rent change: 0.5%
Effective rent: $1,634.20

The Boston area, home of Harvard University, MIT, and Boston University as well as some of the nation's finest hospitals, is seeing damage to its financial sector. Thousands of financial-services layoffs have been announced, including major cuts at Boston-based State Street and Fidelity investments. The unemployment rate climbed to 5.0% in November 2008 compared to 3.6% in November 2007. The apartment vacancy rate jumped to 6.0% in the fourth quarter last year from 4.7% in the same period in 2007. Landlords on average are giving 1.3 weeks of rent concessions.

[MarkDaMan]

Salpare Bay project in court again
Portland Business Journal

The saga of Salpare Bay, a stalled luxury condominium project on Hayden Island, continues in Multnomah County Circuit Court today over a motion for summary judgment.

Attorneys in the case would not comment on the dispute, which involves dozens of parties and enough court filings that fill 36 legal file folders.

Michael DeFrees, the Battle Ground, Wash., developer who led the $100-plus million project, did not return a call for comment on the status of the project or to speculate what will happen at the partly constructed site.

The Salpare Bay construction site on the Tomahawk Island side of Hayden Island remains in shambles, with an abandoned tower crane standing guard over skeletal walls and a field of weeds. Contractor J.E. Dunn Northwest Inc. quit work in mid-2007 for lack of payment and subsequently sued the Salpare Bay development team of Harbor Investors and Columbia Rim Inc.

J.E. Dunn originally claimed more than $4.2 million for construction work and materials. In recent court filings, it indicates it has reduced its claim to $1.14 million.

Salpare Bay was designed as a luxurious waterside condominium project clustered around a private harbor. There were to be seven buildings with 204 units, with prices starting in the $500,000 range. The buildings remain incomplete but the harbor was constructed and is about one-third full.
http://portland.bizjournals.com/portland/stories/2009/02/16/newscolumn1.html?t=printable

[MOPIdaho]

This has nothing to do with Portland, but is a very interesting video on the real estate market in Dubai. http://smashingtelly.com/2009/02/15/bye-bye-dubai/ Maybe I should have posted this under the (why cant we have buildings like this) thread.

[MarkDaMan]

I found this website, agent503.com. He appears to be a kind of bottom feeder, but we all have a make a living, right? Anyway, he does have some interesting information on his website...

stories to follow...

[MarkDaMan]

Portland New Condo Purchase Incentives

Needles to say, new construction projects continue to struggle. With occupancy rates in the teens (%) at some projects, developers are gradually starting to get creative,…well, some of them. Here’s a look at some of the incentives for new construction condos in Portland’s city center:

Encore

Of the 177 units at HOYT’s latest development at the northern edge of the Pearl District only 15 have sold so far. The certificate of completion was issued recently and new homeowners began moving into the Encore on February 13th. Prices had dropped by 12 per cent three months ago. The developer will entertain all “reasonable” offers, but appears content to stick it out.

Current incentive: $5000 towards closing costs or updates/appliances.

937

Fractal Geometry in the Pearl is home to 114 units on 16 floors. So far 27 have sold. Here’s what’s available. To help move things along the developer has secured a 3.875% interest rate on a 30-year fixed for qualifying buyers. Not bad, saves you about 15k-20k over a 3-5 year holding period (vs. a rate of 5.25% )

Waterfront Pearl

Waterfront Pearl, Portland, ORGood news for the Waterfront Pearl. The developer’s loan has been restructured and the construction lien that Hoffman Construction placed on the development back in ‘08 has been removed! This should create some room for the developer to address pricing which has been static - and not exactly competitive - over the last 6 months.

John Ross

Prudential’s agreement to extend the construction loan at the John Ross presumably included some pretty clear guidelines to get those remaining 80 units sold. As a result, pricing - the best of all incentives - has been adjusted significantly. On average units are now priced at a 20% discount over previous price points - some as much as 30%. Here are a couple of examples:

-635 SF, was 268k, now 219k (-18%)
-1206 SF, was 549k, now 389k (-29%)
-1833 SF, was 999k, now 769k (-23%)

And here’s the current price sheet for the John Ross Condos.

Block 90

block90 condos, Portland, ORSituated on 13th and Flanders, this industrial conversion features 11 luxury condominiums equipped with high ceilings, hardwood floors, clerestory windows, and some of the best noise insulation we’ve seen lately. So far only two units have sold. Pricing remains firm, however, the developer is actively addressing some of the potential long-term cost issues and has secured a 10-year construction defect policy with a max. coverage of $1 million per incident ($2 million aggregate).

For most would-be buyers these incentives don’t go far enough. There’s more to be had, but getting there requires a firm understanding of who controls the development and how the decision process is influenced.

http://agent503.com/2009/03/17/portland-new-condo-purchase-incentives/

[MarkDaMan]

Eastside Designer Condos Feel The Heat

A number of mid-sized, high-end, infill condos have been added to Portland’s east-side in recent times. Some of these developments such as the Belmont Street Lofts have been featured in dwell and are widely considered among the most progressive design stuff Portland has to offer. In the wake of the downturn, more recent additions such as 2121 Belmont or the Hakoya Lofts on N Williams have been converted to apartments. Others have stuck to their 🞵🞵🞵🞵, but are now increasingly feeling the heat…and dropping their prices, creating bargain opportunities for design shoppers.

Here’s a snapshot of what’s happening behind the scenes at two designer developments:

Clinton Condominiums - the brainchild of Developer Rappaport and Holst Architecture - is situated on SE Division and 26th. This close-in neighborhood is arguably the heart of Portland’s local-organic-sustainable movement, buzzing with creativity and a magnet for the hipster crowd. There’s a New Seasons Market just a couple of blocks away and pretty much everybody commutes to work by bike.


Here’s how Portland Architecture describes the Clintons:

Looking upward at the condos on floors two through four, the signature element is an assortment of translucent green glass panels that are placed in a somewhat random pattern and at varying widths. It gives the building, especially at night, the look of a jewel or prism with organic sides and angles glimmering in different directions.

Of the building’s 27 units, 70% has been sold - on paper. Only a handful have actually closed so far. In most cases developers will need to unload a min. of 75% to break even, that’s assuming they sell within a year and can pay off the loan. In this case that 70% is a moot point - every dollar counts. Thus in an effort to pay-off the outstanding loan balance, the developer has been accepting increasingly lower offers:

* Unit #307 , 1092 SF started out at $419k, SOLD for $389k
* Unit# 301, 1227 SF closed at $439k, 10k less than what both parties had agreed on
* Unit #202, 895 SF started out at $299k, NOW priced at $260k

——————————————————-

SUM condos on 45th and SE Stark - This new development consists of three townhome-style condos designed and developed by Matt Loosemore and Eric Hoffman’s SUM Design Studio. The two end units each provide three bedrooms and 2.5 baths, roof decks and private parking. Although not LEED certified, the project includes numerous green features: a bioswale (with native plants) collecting rainwater runoff from the building, added insulation with dual-pane windows, low-VOC paint, bamboo floors, permeable driveway pavement, and a 94% efficiency HVAC system.

Here’s what the design critics say:

Like the work of many emerging small firms, SUM have created a nice little fabric building, something modern that nevertheless fits well into its surrounding context of neighborhood single-family homes[...] Lots of modern housing projects in Portland’s historic neighborhoods earn criticism because neighbors don’t like the extra height or the look of the design. This project ought to earn kudos.

These three-level town-homes range between 1500 and 1650 SF in size and are priced in the low to mid 500s. Sales started in early 2008. So far the developer hasn’t seen any bites and thus no means to retire the loan. Much of the developers flexibilty on pricing depends on the size of these loan payments, so here’s my back of the envelope calculation:

* Development value: $1.6M
* Developer profit margin (target): 20%
* Development cost: $1.3M
* Loan amount (at 20% down): $1.1M
* Terms: 7%, 15-year fixed
* Monthly payments: $10000

That’s about $3500 in mortgage payments per unit every month - possibly more.

Interested in finding out what kind of discounts these circumstances translate into? Drop me a note!

http://agent503.com/2008/12/16/eastside-designer-condos-feel-the-heat/

[sowat]

the Agent503 article is a few months old, but the news is only more grim as the economy has tanked. Of the 27 Clinton Condos, 11 are currently in the MLS, that's well over a third unsold. As for SUM-thing, they were all originally listed in the low-mid 500s, now they are 469k, 489k, and 499k. Apparently houses in SE are still selling, but the condo market is just dead, city-wide. Either because potential buyers want dramatically lower prices (myself included), while developers are just trying to break even, and/or there's still a glut of inventory. Probably a bit of both, plus with a sudden flood of new rental projects arriving and coming to market, buying an overpriced condo just makes no financial sense right now. Of the more than two dozen listed condos at 937 I've been tracking, only one or two have sold since the the October opening. Things might improve this spring with low interest rates, and a general impression that the economy is stabilizing at least.

[MarkDaMan]

Retailers in Portland’s West End have high hopes
Rising buildings in Central Business District may help retail area continue to develop
Daily Journal of Commerce
POSTED: 04:00 AM PDT Monday, March 23, 2009
BY NATHALIE WEINSTEIN

When Celeste Sipes and her business partner Gina Johnson started looking for retail space for their boutique Radish Underground, they were immediately drawn to Portland’s West End, an up-and-coming retail area bounded on the north and south by Burnside and Alder streets, and on the east and west by 13th and 10th avenues.

“We chose space based on neighborhood density numbers and things like hotel density,” Sipes said. “Downtown, by far, has the largest density numbers. I liked the feel of the area and the proximity to the Ace (Hotel), Powell’s Books and other hotels.”

Originally hoping for space in the Mekka Building on the corner of Southwest Washington Street and 10th Avenue, Sipes and Johnson soon learned that they weren’t the only ones paying attention to this small chunk of downtown known as the West End. During the leasing process, three of the storefronts in the Mekka Building were leased by other boutiques, according to Sipes.

Not wanting to stray far from what was beginning to look like a miniature fashion district, Radish Underground opened shop in October 2008 in a former storage space on the ground floor of the Pittock Block, which faces the Mekka Building along 10th Avenue.

Now, five months later, Radish Underground and other neophyte West End retailers such as Covet, Narcisse and Frances May are looking skyward, where two large mixed-use projects are currently under construction between Burnside and Washington streets on 12th Avenue. The success of these projects, according to the shop owners, would give the West End a much needed boost in foot traffic and higher visibility to attract new potential lessees.

Boutique owner Athena Frazier, for one, is eager to see new faces in the neighborhood.

“I can’t wait for those buildings to be filled with employed people,” said the owner of Covet in the Mekka Building. “I think these developments will bring new life to the area.”

Currently being built by Hoffman Construction, the Gerding Edlen-developed 12W building at Southwest Washington Street and 12th Avenue will be 22 stories high with 17 floors of housing, four floors of office space, and ground floor retail. Up the street at 13th and Burnside, Yorke & Curtis will begin construction on the Weave Building in August. Designed and co-developed by Skylab Architecture, the Weave will be a 10-story, mixed-use building containing office space and ground-floor retail. The Weave is scheduled to complete in 2010, and 12W could be finished as soon as May.

“The more retail there is in the area, the better,” says Heidi Goldsmith, a co-owner, with Dawn Bush, of Narcisse in the Mekka Building. “Once it’s more of a shopping destination, business will pick up. People don’t want to drive across town just to visit one shop.”

Goldsmith was influenced to open shop in the Mekka Building in October 2008 because of its owner, developer Richard Singer. He is best known as the mastermind behind the development of the Northwest 23rd Avenue neighborhood. Last year, he purchased the Mekka Building and the neighboring 415 Building, which has not yet been redeveloped.

“I was really excited about the landlord,” said Goldsmith. “I liked him because he thinks about what he puts next to one another. I think there’s an effort happening to connect the area.”

However, with the national economy in tumult and retailers closing every week around the city, the question remains: If they build it, will more retailers come?

“We’re feeling bullish on that area,” says Jon Kellogg, a realtor at Commercial Realty Advisors NW who is managing leasing for 12W and the Weave Building. “There’s strong activity in the retail and restaurant spaces. We are in discussion with retailers for the Weave and the Gerding Edlen project is on schedule.”

Kellogg was the broker for the Mekka Building, where Frances May, Covet and Narcisse have leased space.

“That’s a nice little nucleus that has been established,” said Kellogg. “This area is ripe for new ideas and concepts. The bridge over Burnside is being strengthened. There is more traffic coming back and forth between the Pearl and the West End.”

Foot traffic alone, however, is not enough to guarantee the success of a retail store in today’s market, according to Sipes.

“I think this is an era of creative retail,” Sipes said. “When the economy was good, you could just throw your doors open. Now you have to work at it. We do shows and events to draw people in and are establishing relationships with local artists. I don’t think we could survive on foot traffic alone.”

To that end, the shops have been working together to promote one another, as well as promoting the West End as the next Portland shopping destination. Frazier of Covet and Pamela Baker-Miller, owner of boutique Frances May, worked together to create a walking map of the West End that shows the locations of shopping, dining and lodging attractions in the area.

“There’s power in numbers,” said Frazier. “We can only benefit by helping each other. It’s a new neighborhood and a new business. Every day I try to be positive and inventive.”

http://www.djcoregon.com/articleDetail.h...ings-in-Central-Business-District-may-he

[MarkDaMan]

^This article has some good stuff but it irritates me. I would argue the West End commercial district extends all the way to the North Park Blocks. That would include the PAW tower, Director Park area, as well as the Galleria. Or at least that is what Vera had in mind originally when she spoke of the West End redevelopment.

The only thing breaking up the congruent district from the North Park Blocks to the Brewery Blocks is that large empty parking lot right in the middle of everything, and the other half block parking lots.

[sowat]

5 Clinton Condos went 'Pending' over the weekend. Apparently the developers lined up 4% financing with 5% down (for qual. buyers). Good for that project. Only 6 more left, I think.

[Quantum]

Originally Posted by sowat

5 Clinton Condos went 'Pending' over the weekend. Apparently the developers lined up 4% financing with 5% down (for qual. buyers). Good for that project. Only 6 more left, I think.

Ouch, I'll bet that cost them...

[sowat]

Originally Posted by sowat

...As for SUM-thing, they were all originally listed in the low-mid 500s, now they are 469k, 489k, and 499k...

Sum-thing prices just dropped again to 449, 479, and 489. Those guys must really be hurting by now. Funny how as prices come down things only seem more expensive.

Meanwhile there are still 7 active Clinton Condo listings, after that burst of sales last month. Very little activity on the listed 937 Condos as yet this spring. One of the two Z-haus units finally went pending, the other still unsold. So much for green shoots.

Restored Irvington/Alameda English-Bungalows seem to be moving though...