Block 216 Tower - Ritz Hotel and Condos | 459'-11 1/2" | 35 floors | Complete

[58rhodes]

^-this will be fun to watch.

[maccoinnich]

This whole story is jaw dropping.

Betting on the Ritz: New downtown tower to offer record-breaking prices



Developers of a mammoth downtown tower are betting their ultra-high-end building will fetch condo prices and hotel room rates unprecedented in Portland.

Block 216, a proposed 35-story structure at Southwest Ninth Avenue and Alder Street, will cost about $600 million to build, making it one of the most expensive single-building projects in the city’s history.

Developer Walt Bowen intends to charge $1,350 to $1,900 per square foot for 138 condos, prices never before seen in Portland, according to documents Bowen’s organization issued to possible investors. Bowen is moving ahead with his Block 216 plan despite a significant and surprising downturn in the local condo market.

...continues at the Oregonian.

[johnliu]

Wonder how much risk the developer is retaining. $450MM bank debt, $140MM OZ investors, $16MM fee.

[urbanlife]

I wouldn't be surprised if the condos get turned into apartments during construction. I am guessing the hotel portion and office space are what's helping this building pencil out. Hopefully they don't come back with a redesign an take off the condo portion and give us a stumpy building.

[MarkDaMan]

Originally Posted by urbanlife

I wouldn't be surprised if the condos get turned into apartments during construction. I am guessing the hotel portion and office space are what's helping this building pencil out. Hopefully they don't come back with a redesign an take off the condo portion and give us a stumpy building.

This building isn't being built for the 98%. Their targeted market is still doing incredibly well. It's HIGHLY unlikely a Ritz branded residence will go apartments. It's also highly unlikely there will be a course correction for this tower. Remember PAW never secured a construction loan, Moyer became ill and the economy blew apart causing the considerable construction delay.

That said, anything is possible.

[Tykendo]

It's great to see a developer take a chance on this beautiful city. All major cities have crime, homelessness, and other downers. It's a problem of society in general. The Oregonian makes PDX out to be some sort of failing market. It's not. Japanese Tourism is on the rise. Many people from the Far East are investing tons of money in NW Destinations (Vancouver, Seattle). Portland is next. I truly believe in the Rose City, not just as a great place to raise a family, but as a destination for tourism. It has a lot to offer. Small minded thinking has stunted this city's path before. Thank goodness some can have the vision to move forward.

[rsbear]

Originally Posted by urbanlife

I wouldn't be surprised if the condos get turned into apartments during construction. I am guessing the hotel portion and office space are what's helping this building pencil out. Hopefully they don't come back with a redesign an take off the condo portion and give us a stumpy building.

I seriously doubt a developer would include condos in a project if the condos themselves didn't "pencil out". That would be one dumb-ass developer, along with a bunch of dumb-ass investors.

[Leo]

Originally Posted by rsbear

I seriously doubt a developer would include condos in a project of the condos themselves didn't "pencil out". That would be one dumb-ass developer, along with a bunch of dumb-ass investors.

OK, we just *literally* went through this exact scenario ten years ago, and it caused the greatest worldwide financial crisis since the Great Depression. Have we forgotten already?

[rsbear]

Originally Posted by Leo

OK, we just *literally* went through this exact scenario ten years ago, and it caused the greatest worldwide financial crisis since the Great Depression. Have we forgotten already?

I was referencing the present and this specific project.

[johnliu]

Originally Posted by rsbear

I seriously doubt a developer would include condos in a project if the condos themselves didn't "pencil out". That would be one dumb-ass developer, along with a bunch of dumb-ass investors.

Penciling out (working on paper) isn't the issue. If you assume $450/night and $1400-1900/sqft, no doubt the project works great on paper. After all, the developer is forecasting that investors will 2X their money.

The interesting thing to watch is whether the hotel will actually get the needed occupancy at $450/night and whether the condos will actually sell at $1400-1900/sqft ($1.9 million for 1,000 sqft).

Currently, at or close to the peak of an economic cycle, the most high-end, luxurious condos in Portland sell for very roughly $1000/sqft (Cosmopolitan etc). This building is supposed to come on the market in 4 years. $1000 to $1900 in 4 years is +18%/yr appreciation. High end condos are not appreciating that fast now, and may not have been even when the market was appreciating a couple/few years ago.

Perhaps these condos will be considered ultra-high-end and establish an entirely new price level? Perhaps the cycle will accelerate to new highs and deliver that +18%/yr? Perhaps we'll have a short mild recession between 2019 and 2023, condo prices will actually drop for a couple years, and then soar to reach $1900 by 2023? Those seem like the scenarios where paper -> reality.

How probable are those scenarios - don't know but I think some skepticism is warranted. That's why it would be interesting to know how much risk is being retained.

[MarkDaMan]

Originally Posted by johnliu

How probable are those scenarios - don't know but I think some skepticism is warranted. That's why it would be interesting to know how much risk is being retained.

Are you asking as a potential investor or just some armchair skeptic on an urban development blog?

If they build the tower, which all signs point to they are, it's up to the developer and investors to make the plan a reality. If the plan is unattainable, we'll hear about it in 4 years or so. Either way, there's no downside to people not invested in this project that I can come up with?

[johnliu]

Originally Posted by MarkDaMan

Are you asking as a potential investor or just some armchair skeptic on an urban development blog?

If they build the tower, which all signs point to they are, it's up to the developer and investors to make the plan a reality. If the plan is unattainable, we'll hear about it in 4 years or so. Either way, there's no downside to people not invested in this project that I can come up with?

Both, actually. The Opportunity Zone aspect is potentially very interesting to some entities I advise, as a tax shelter and investment. OZ funds are popping up all over. Many are national funds, where investors hand money to a fund manager who hands it to a real estate investment company who goes looking for projects. Advantage: diversification, some liquidity, and potentially lower fees. Disadvantage: you have no idea what projects your money will get invested in, not even what state or type of RE. In Portland we're seeing these single project OZ funds, in Vancouver as well. Advantage: you can assess the city, developer, site, and project that you're investing in. Disadvantage: less liquid, and totally undiversified - if the project fails, you're toast, especially if you're junior to the bank. I've looked at some OZ funds but need to look at more. The window to invest for maximum tax shelter closes at the end of 2019.

I sense some irritation in your part when I sound skeptical about the investment aspect or economics of a project. Well, not all projects will work, as we saw ten years ago and will continue to see. I suppose in some sense it doesn't matter if banks and investors lose money as long as they leave the buildings behind. But it can matter if projects get turned from silk purses to sow's ears due to the economics.

[urbanlife]

Originally Posted by MarkDaMan

This building isn't being built for the 98%. Their targeted market is still doing incredibly well. It's HIGHLY unlikely a Ritz branded residence will go apartments. It's also highly unlikely there will be a course correction for this tower. Remember PAW never secured a construction loan, Moyer became ill and the economy blew apart causing the considerable construction delay.

That said, anything is possible.

The hotel portion I am not concerned about, Portland is ready for a 5 star hotel. Its the condos portion because that often times relies on how many units they can sell before construction, though I don't know if the hotel and office space being enough to get the building constructed without preselling enough of the condos beforehand.

This is just me being nervous with this whole project and not wanting to see only the hotel and office portion being built on a full city block. That block is really meant for a tower like what has been proposed.

[AcmeGreg]

Originally Posted by urbanlife

The hotel portion I am not concerned about, Portland is ready for a 5 star hotel. Its the condos portion because that often times relies on how many units they can sell before construction, though I don't know if the hotel and office space being enough to get the building constructed without preselling enough of the condos beforehand.

These are Ritz Carlton (branded) condos, not your run-of-the-mill Cosmo units . I would assume an organization with that type of brand equity would have done their homework prior to breaking ground, and that investors would have done the same. Be interesting to look at their (and other brands') track record in that regard. I guess you could find 138 hedge fund managers, law partners, Nike execs... Salt & Straw owners... in this city who could afford to buy in, or maybe they can attract some of those oversea Oligarchs and Oiligarchs that are snapping up condos in NYC?! The fact that a project of this scale has come together so quickly should either be extremely reassuring... or very scary indeed! (or both)

[MarkDaMan]

Originally Posted by johnliu

I sense some irritation in your part when I sound skeptical about the investment aspect or economics of a project. Well, not all projects will work, as we saw ten years ago and will continue to see. I suppose in some sense it doesn't matter if banks and investors lose money as long as they leave the buildings behind. But it can matter if projects get turned from silk purses to sow's ears due to the economics.

I, personally, wouldn't invest in this project but I'm bullish about it's future. I can agree that the developer and investors are taking on significant risk, but I believe this developer has done his homework and based on his previous two large scale projects, can make this a success.

Just want to point out that exactly one large scale project, that eventually was built to it's full potential, has come out of the ground and faced a significant delay in completing construction in the past decade, in Portland. The circumstances surrounding PAW and it's multi-year delay just aren't currently at play in this Ritz tower.

[mhays]

US cities have lost much of our offshore buyer pool due to China closing off capital outflow routes, and our other immigration issues. Condo values in Seattle are down maybe 10-20%. I wouldn't bank on that route unless the China issue changes and we generally improve international relationships in 2021.

Love the project btw. Though do miss the pod.

[Leo]

Originally Posted by rsbear

I was referencing the present and this specific project.

That is precisely the point. If we don’t learn from history, we are doomed to repeat it.

The big lesson from the housing bubble is that it’s foolish to assume investors have done their research and have performed adequate risk assessment.

[rsbear]

Originally Posted by Leo

That is precisely the point. If we don’t learn from history, we are doomed to repeat it.

The big lesson from the housing bubble is that it’s foolish to assume investors have done their research and have performed adequate risk assessment.

So, then, no one should ever take any risk and build anything because something bad might happen?

[Leo]

Originally Posted by rsbear

So, then, no one should ever take any risk and build anything because something bad might happen?

No. But no one should take risk because they assume everyone else with skin in the game has done their homework.

There are dumb-ass developers and dumb-ass investors (your terms) all over the place. There are 7.5 billion people in the world; by sheer luck many must necessarily fall ass-backwards into money for some short period of time.

[MarkDaMan]

Originally Posted by Leo

No. But no one should take risk because they assume everyone else with skin in the game has done their homework.

There are dumb-ass developers and dumb-ass investors (your terms) all over the place. There are 7.5 billion people in the world; by sheer luck many must necessarily fall ass-backwards into money for some short period of time.

What does your comment have to do with this development? BPM Real Estate is perhaps the most successful current office/hotel development company in Portland. Pearl West, which went up during the recession, and the Broadway Tower have been absolute knock out projects delivering HUGE returns on their investment. Bowen has proven himself to be a savvy developer that has left two gems with a third going up. He's also secured full funding for this tower and they've barely dug up the parking lot.