Friday, February 12, 2010
Stalled developers court PDC lease
Lease could help restart two high-,profile projects
Portland Business Journal - by Wendy Culverwell Business Journal staff writer
TMT Development Co. Inc. hopes to revive its stalled Park Avenue West Tower project by becoming the new home of the Portland Development Commission and its 185 employees.
TMT Development is one of three landlords that have submitted lease proposals to the PDC. The economic development agency’s lease in Old Town expires in August 2011.
Winkler Naito Development’s One Waterfront Place — another stalled project — also submitted a lease proposal, as did the owners of downtown’s Galleria.
The lease is significant because it’s big enough to help either of the stalled projects receive bank funding to start or finish construction.
The PDC released copies of the proposals in response to a public records request. However, the agency redacted offering terms, including rent and other costs, making it impossible to determine which prospective landlord is offering the best deal.
The PDC, which leases 68,485 square feet in Old Town, is a very desirable tenant in a market plagued by rising vacancy rates and stalled construction projects.
The vacancy rate for Class A and B space in the central business district has been rising since early 2009. It stood at 10.1 percent at the end of the year, according to Pacific Real Estate Partners.
The proposals were unsolicited and the development commission is not bound to select one of them.
Portland Mayor Sam Adams has acknowledged the impact the PDC’s $138,000-a-month budget for office space could have on downtown development.
Kimberly Schneider, Adams’ director of economic development, said the mayor directed PDC leadership to evaluate all proposals with an eye toward using the city’s resources as a catalyst to stimulate business.
Equally important, she said, the city doesn’t want to incur new expenses. Any new lease would have to be comparable to the $24 per square foot rent it pays at 222 S.W. Fifth Ave. That might make it difficult for the city to lease space in either stalled tower.
PDC spokesman Shawn Uhlman said the agency needs room for 185 employees and typical office amenities. It also needs a large meeting area to accommodate the commission’s public meetings.
It will likely require space that is certified under the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) program. All three proposals include LEED certification.
Of the three, TMT Development’s bid to recruit the PDC to Park Avenue West is the most transparent plea for the city’s help to restart a stalled project.
TMT stopped construction of its office-and-condominium tower at Southwest Park Avenue and Yamhill Street nearly a year ago, leaving a tower crane and a giant hole in the block immediately west of Nordstrom.
Although law firm Stoel Rives LP leased more than 157,000 square feet, about half the building, the developer couldn’t secure a construction loan and apparently needs more tenants before it can restart work.
TMT inferred in its proposal that choosing the tower is in step with PDC’s mission to foster economic activity.
The company’s lease proposal said restarting construction would re-employ 60 of the 84 employees laid off by its steel fabricator, Fought & Co., and would forestall future layoffs. The project would employ 300 full-time workers and create more jobs off-site.
Construction would generate $28.2 million in wages and $1.8 million in annual property taxes after completion.
Vanessa Sturgeon, TMT president, wouldn’t comment on the proposal, but said she’s optimistic the project will be financed soon. Capital markets have loosened, she said, and TMT is working with a lender.
If the PDC moved into Park Avenue West, it would be on the fourth to seventh floors. Stoel Rives is slated to take the 16th to 26th floors.
The PDC isn’t big enough on its own to jump start One Waterfront Place, slated for construction on PDC-owned land adjacent to the Broadway Bridge.
But it wouldn’t hurt, said developer Jim Winkler and leasing broker Tom Becic of Melvin Mark Brokerage Co.
“Everyone is looking for those additional tenants to push us over the goal line,” Becic said.
In its pitch, One Waterfront noted that the project will create 600 jobs and locating there would cement the PDC’s commitment to the River District.
Most important, having PDC would bolster the confidence of prospective tenants.
“PDC’s lease obligation will help jump-start a major development worth over $100 million,” it said.
The One Waterfront proposal emphasized that the building’s LEED Platinum facilities will save the development commission $650,000 a year in utility costs, improved worker productivity and reduced employee turnover.
The Galleria, 921 S.W. Morrison St., so far is the only existing building in the mix.
The company wants to complete a LEED-rated renovation that would turn the Galleria into the flagship of its downtown real estate empire.
It is looking for a tenant for its 35,000-square-foot second floor and has made numerous unsolicited proposals to tenants known to be in the market, said William Barendrick, an official with Bill Naito Co., which owns the building.
The Galleria offer expired this week, but Barendrick said he still welcomes contact from PDC, or any potential tenant.
The Portland Development Commission pays around $24.18 per square foot annually in rent. Its lease expires in August 2011. The owners of three high high-profile buildings are already bidding to be the agency’s new home.
• Park Avenue West Tower: Rent costs approximately $34 per square foot.
• One Waterfront Place: Rent costs approximately $35 per square foot.
• Galleria: Rents cost around $24 per square foot.
Lease proposals submitted to the Portland Development Commission were redacted under the Trade Secrets and Confidential Submissions exemptions to Oregon’s public records law. The above information reflects published rents for each building.
wculverwell@bizjournals.com | 503-219-3415
http://portland.bizjournals.com/port...ml?t=printable
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