Oak Tower | Dead

[J Gibson]

This is an interesting deal. I brokered a deal and sold the police headquarters building next door five years ago. This, as you'll recall is certainly not the first proposal for this site. Get in line behind the hotel and the office building. I will reserve my opinion about the city council but it's high time for the non-partisan partisans to start asking "How can we? instead of Why should we?" If ever there were two commisioners looking for a reason to say "no" its Sten and Leonard.

[urbanlife]

oh no, I agree with you Mark, Potter has done a good job fixing all that has been going wrong. And I would like to see him continue this path he is on. While he might not be a showboat of a mayor, I think he is doing a fine job.

[edgepdx]

Here's Randy Leonard's post over at Blue Oregon re: The Oak Tower and PDC:

PDC; Out of Control
Randy Leonard

Construction_worker
An editorial in today’s Oregonian goes after “electricians, plumbers and many other workers” for “padding their paychecks” when working on public works projects and receiving the “prevailing wage”

Basically, the test of whether prevailing wage is required on a project is
1- Are there any public dollars involved? AND
2- Does the public agency (in this case, PDC) decide and control what is being constructed?

The editorial uses Central City Concern (CCC), a local non-profit that provides housing and treatment to recovering alcoholics and addicts, as a potential victim of having to pay higher construction costs because of the prevailing wage requirement. CCC often receives taxpayer dollars provided them by the Portland Development Commission when CCC constructs or rehabilitates buildings for their clients.

Interestingly, they use the following quote from me in the editorial from a story that appeared last Sunday in the Oregonian regarding PDC’s approach generally to the prevailing wage;

"It seems like they ignore the rules to provide some comfort to the income classes".

The editorial used that quote in order to argue that CCC serves the most downtrodden in our city, is not rich and thus I must not know what the hell I am talking about (again).

The problem for the Oregonian editorial writers was that I personally negotiated on behalf of CCC with the Bureau of Labor for an exemption to the prevailing wage requirement on CCC's latest housing project the Oregonian editorial board was alluding to.

In fact, I used the CCC project and my advocacy on their behalf to the editorial board (in writing) as an example of where I thought there was a middle ground in applying the prevailing wage on some projects.

However, it appears the editorial board thought it was more tantalizing to readers if I was advocating that altruistic, non-profit organizations such as CCC were being forced by me to pay higher wages for construction projects than what they can afford.

Apparently the editorial board believed my advocacy for CCC did not help their (and PDC's) argument so they ignored it.

They also ignored the example of PDC's overly cozy relationship with a developer that I gave them (again...in writing) that prompted my criticism of PDC that was accurately quoted.

Let me explain for you the example I gave the editorial board that I believe best illustrates PDC's improper assistance to some of the most wealthy in our city...at the expense of the working class.


The PDC was interested in acquiring the old Police Bureau property on the corner of SW 3rd and Oak in 2002. They had an appraisal done that indicated the property was worth $850,000. The PDC promptly paid $1.2 million for the property and then spent another $500,000 removing the building and cleaning up contamination to make the property "shovel ready" for a developer.

PDC then had the very same appraisal firm do another appraisal in 2006. The second appraisal now indicated the property was worth negative $2.7 million.

Yes, you read that right. NEGATIVE $2.7 million dollars. And yes, that property is in downtown Portland.

But wait. There’s more.

Then the PDC commission voted to give the property to a private developer to construct a 168 unit condominium project on the condition that 15% of the condominiums initially be affordable for people earning 120% of median family income, which is about 40% higher than the nearest threshold for City Council approval. After nine months, the development proposal says, any units not sold can be sold to people of any income level.

At a time when we have senior citizens who are in poverty on multi-year waiting lists to get into decent housing, the PDC constructed a deal on the SW 3rd and Oak property that benefits upper income Portlander’s with a huge taxpayer subsidy.

And for the icing on the cake, the PDC communicated to the private developer that the project would not be prevailing wage because prevailing wage law is triggered by a government subsidy, and since the property on SW 3rd and Oak had a negative value it did not amount to a subsidy, and would not trigger prevailing wage.

The Oregonian editorial board's use of convenient facts, and utter disregard for all other facts in this discussion is disappointing. Further, they endorse the PDC's overt circumvention of prevailing wage law and City Council policy, which includes the gift of public property to a developer who will build high-end housing downtown.

The public deserves better. It seems both of these public institutions have forgotten their responsibility to the public.

Fortunately, this is not the end of the story on the SW 3rd and Oak property. I have filed a resolution that will be heard this Wednesday morning that will require an independent audit be conducted of the PDC’s entire transaction history with the SW 3rd and Oak property.

The editorial today characterizes PDC’s current strategy to avoid paying prevailing wage and circumvent City Council oversite as “shrewd”.

I say it smells. And PDC, with it’s overly cute tactics, is fast approaching its day of accountability.

[tworivers]

Looks like Leonard got his way last week. I assume Oak Tower is on hold now?

Potter bristles at push to audit agency

Jul. 6, 2006 (Knight Ridder/Tribune Business News delivered by Newstex) --
City Commissioner Randy Leonard's efforts to hire an outside auditor for a checkup on the Portland Development Commission dissolved Wednesday into one of the most heated public exchanges among council members since Mayor Tom Potter took office 18 months ago.

Leonard says the development commission may be subverting City Hall's wishes with its planned subsidies for a high-rise condo tower at Southwest Third Avenue and Oak Street. Leonard brought a proposal to the council Wednesday ordering an outside audit of the deal.

Commissioners Sam Adams and Erik Sten joined him in approving the audit -- but not before Potter made a rare forceful objection to the review of an agency he runs.

"I find not only that this is unnecessary but I think it's both inflammatory and derogatory of the PDC commission themselves," he said in his closing statement. "I'm sorry this has passed."

The vote shows an emerging City Hall alliance that doesn't include Potter around the Portland Development Commission. For most of Potter's first term, council meetings had a calm tone as the commissioners rapped out 5-0 votes. There's still plenty of unanimous votes, but Adams, Leonard and Sten have become a skeptical bunch on the development commission.

With an annual budget exceeding $200 million, the Portland Development Commission is a powerful force in city politics. It invests property tax payments on construction projects meant to improve the city. The commission is the only city agency to report both to City Hall and an independent board appointed by the mayor. The agency's big budget and independence have put it at the center of controversy at various times in its 50-year history.

In his most recent battle, Leonard says the Portland Development Commission may have subverted city policies on affordable housing and living wages for construction workers on a condo tower at 209 S.W. Oak St.

The commission had the property appraised at $850,000, then paid $1.2 million for it. A second appraisal by the same company showed the property's value at negative $2.7 million, Leonard says. The commission's requirements for affordable units, parking spots and trash services for the next-door building dropped the property's value below zero, the commission said.

Based on the final appraisal, the commission agreed to donate the land to developer Trammell Crow (NYSE:TCC) Residential for a 26-story, 160-unit condo tower.

As soon as Leonard finished talking about his proposed audit, Potter jumped in. One section of the resolution was inaccurate. Another went against the city charter, he said.

But Leonard wasn't backing down. Talking over Potter, he said: "Well, let's let PDC sue us over that." Leonard eventually agreed to minor word changes to address the mayor's concerns. But Potter kept up his objections.

The resolution, Potter said, wasn't necessary because the agency had already agreed to the audit.

Potter and Commissioner Dan Saltzman, who've formed a tight alliance this year, both opposed the resolution.

Saltzman said he, too, had questions about the condo project. But Leonard's proposal, he said, was over the top. "This resolution implies to me we're conducting more of a criminal inquiry," he said.

Officials at the Portland Development Commission weren't at the meeting Wednesday. A spokeswoman didn't return a call seeking comment.

[CouvScott]

Unions, Sten mull reform of PDC
Council control of agency's budget may become ballot proposal
By Jim Redden

The Portland Tribune, 10.5 hours ago

Commissioner Erik Sten is drafting a proposed ballot measure that would give the City Council authority over the budget of the Portland Development Commission, the city’s quasi-independent urban renewal agency.

Sten said he has not yet decided whether to submit the measure to the council for placement on the November general-election ballot. The PDC spends more than $200 million a year on development projects in 11 urban renewal districts around town.

“I think the council should have control over the PDC’s budget, but I want to get feedback from the rest of the council and other people involved with the PDC before I make a final decision,” he said.

Sten said he also wants to hear from the Oregon AFL-CIO, which this week began polling Portland residents about their feelings on the PDC. According to Bob Shiprack, president of the Oregon Building Trades Council, the $20,000 poll includes questions on the public perception of the agency and its spending priorities.

Among other things, the unions want the council to compel the PDC to require that developers pay state-set construction wages on agency-supported projects. A majority of the council – Sten, Sam Adams and Randy Leonard – agree but do not have the authority to make the PDC comply.

“At this point, we think the City Council should do something to make sure the PDC does what they want it to do, but we want to see what the poll shows before we talk to the council about specifics,” Shiprack said, adding that the poll should be completed in two or three weeks.

Sten said he might consider waiting until next year to place the measure on the ballot. Mayor Tom Potter has appointed a citizen Charter Review Commission that also may propose changes to the PDC. The commission is not scheduled to finish its work until early next year, however.

“I want to coordinate my effort with the mayor and might be willing to include it as part of a larger charter-reform package next year, depending on what it looks like the commission might be recommending,” Sten said.

John Doussard, Potter’s press aide, said waiting until the commission completes its work is the best idea.

“The mayor doesn’t think there should be competing measures. The commission’s proposals deserve a fair hearing,” he said.

If Sten decides to submit a proposal for this November, he is likely to have the support of Adams and Leonard, giving him the majority he would need to place it on the ballot.

Adams has repeatedly expressed support for the council exerting more control over the PDC, especially to guarantee that more affordable housing units are included in agency-supported projects.

Leonard has gone even further, proposing a charter amendment last year to give the council control over all aspects of the PDC, not just its budget. It died for lack of other council support at that time.

The PDC board has not taken a stand on any possible charter-reform proposals, including the one being drafted by Sten. New PDC board chairman Mark Rosenbaum declined to comment on the concept of the council having control over the agency’s budget until after he has seen Sten’s specific measure.

“Whatever happens, I think it is important that the PDC’s agenda be forward-looking,” said Rosenbaum, managing partner of Rosenbaum Financial, a local financial management firm.

Whatever is proposed must comply with state urban renewal laws. The council has until

Aug. 16 to place a charter measure on the November ballot.

Board full of new faces
Ironically, Sten is drafting the measure as Potter is on the verge of appointing his first complete PDC board of directors. When Potter took office in January 2005, the five commissioners had been appointed by his predecessor, Vera Katz. Their terms have all expired over the past 18 months, allowing Potter to appoint their replacements, including Rosenbaum, who was elected PDC board chairman Monday.

Potter appointed his fourth commissioner Wednesday: Charles Wilhoite, managing director at Willamette Management Associates, a firm specializing in financial consulting, economic analysis, and business valuation services. Until recently, Wilhoite also served as chairman of Potter’s Charter Review Commission.

If confirmed by the council next week, Wilhoite will join Rosenbaum and two other Potter appointees on the board – Bertha Ferrán, a senior mortgage consultant at Windermere Mortgage Services, and Sal Kadri, owner of ValueCAD, a high-tech company.

“I think the new board is well-positioned to move the PDC forward, and to do so in close cooperation with the council,” Rosenbaum said.

Potter has not decided yet on the fifth and final commissioner, Doussard said. According to Shiprack, organized labor believes one of its own should fill that post. He is pushing John Mohlis, a bricklayer who serves as executive secretary-treasurer of the Columbia Pacific Building Trades Council.

Mohlis said he has told Nancy Hamilton, Potter’s chief of staff, that he wants to serve on the PDC board.

“I’d be honored to serve on it. I have a lot of experience with construction projects. The PDC is involved in a lot of construction projects, and I think they would benefit from my perspective,” he said.

Mohlis thinks the PDC should require developers to pay state prevailing wages on agency-supported development projects. Prevailing wages are set by the state labor commissioner, based on an annual survey of construction wages conducted by the Oregon Employment Department. They tend to be the same as union wages, especially in metropolitan areas, such as Portland.

The PDC has so far resisted requiring developers to pay prevailing wages and has successfully fought the state in court over the issue. But Rosenbaum said the question of whether and when to require prevailing wages be paid is open to discussion.

“There is a lot of confusion over this issue that needs to be resolved. Whether or not a member of the labor community serves on the commission, we need to discuss the issue and resolve it,” Rosenbaum said.

Mohlis said he is interested in more than the prevailing wage rate issue, noting that he serves as a trustee on the fund of the $75 million Northwest Bricklayers Pension Trust, which has much of its money invested in real estate.

“I understand the business end of real estate deals,” he said.

Doussard said the mayor knows of Mohlis’ interest and will interview him along with other potential nominees.

Mayor allows closer eye
Rosenbaum believes there are two primary reasons why the council is taking such a close look at the PDC – Portland’s new mayor and the city’s financial situation.

“Mayor Potter’s approach to government is different than any of his predecessors. He is committed to making decisions in an open and transparent manner. Previous mayors have insulated the PDC from a lot of scrutiny. This is the first time the council has been able to ask questions about the PDC’s policies and decisions, and they expect answers,” he said.

At the same time, Rosenbaum believes the council has less discretionary money to spend on public projects, especially since the federal government has cut back on the housing and transportation funds available to cities.

“The city’s access to resources is just really stretched. In these circumstances, access to the piggy bank at the PDC is very tempting. There’s just not a lot of money to pay for streets, parks or housing anywhere else,” he said.

Sten agrees the PDC controls a lot of redevelopment dollars, which is why he thinks the council should have a greater say over how it is spent.

“The council should be driving the PDC’s agenda. At this point, the PDC is driving the city’s development agenda,” Sten said.

[Alek184]

I couldn’t find a bit of info about Oak Tower in the last two months. Very intriguing scenario. Any updates on status of this project?

[MarkDaMan]

Well, Trammell Crow has just been bought out by CB Ellis and I don't think anyone knows how this is going to affect future developments, or ones currently in the hopper. It would be nice if the bigger company can spur these projects (Oak and Alexan) along.

[CouvScott]

Originally Posted by MarkDaMan

Well, Trammell Crow has just been bought out by CB Ellis and I don't think anyone knows how this is going to affect future developments, or ones currently in the hopper. It would be nice if the bigger company can spur these projects (Oak and Alexan) along.

Was this just an offer by CBRE or is it a done deal? I have been too busy to pick up the paper.

[MarkDaMan]

^I don't think the deal has closed yet, but it appears the agreement is a done deal.

CBRE to acquire Trammell Crow Co. for $2.2B
Portland Business Journal - 3:01 PM PST Tuesday

Trammell Crow Co. has agreed to be acquired by CB Richard Ellis Inc. in a transaction valued at $2.2 billion.

The move firmly cements Los Angeles-based CBRE's role as the world's largest commercial real estate firm, creating a conglomerate with offices in 50 countries and 21,000 employees.

Both companies have substantial presence in the Portland area.

In the Business Journal's list of top commerical real estate firms, CB Richard Ellis is ranked No. 1 and Trammell Crow is ranked No. 10.

In the list of top commercial property managers, Trammell Crow is ranked No. 3 and CB Richard Ellis is ranked No. 5.

CBRE (NYSE: CBG) will pay $49.51 per share for Dallas-based Trammell Crow's (NYSE: TCC) common stock in cash. The deal is expected to close in the fourth quarter of 2006 or the first quarter of 2007, pending shareholder approval. It has already been given the OK by both companies' boards of directors.

According to an investor presentation released by CBRE Tuesday, the acquisition will take the company's effective 2006 revenue from $3.4 billion to $4.4 billion. The combined group would be the first commercial real estate services company to qualify for the Fortune 500 list of the largest U.S. corporations. It will have a client base that includes 85 percent of the Fortune 100.

Rumors of a merger between the two giants have been floating around in the local market for some time, as first reported by the Dallas Business Journal in October 2005. Bob Sulentic, Trammell Crow chairman and CEO, will join CBRE as group president overseeing the development and investment business. The Dallas Business Journal obtained a copy of an Oct. 31 memo Sulentic had sent to employees. In it, he said that Trammell Crow Co. executives Jim Groch, Matt Khourie, Chris Roth and John Stirek would continue in their leadership roles as co-presidents.

That group will retain the Trammell Crow Co. brand name and operate as a wholly owned subsidiary of CBRE.

According to the memo, key leaders from the company's Global Services group -- Mike Lafitte, Bill Concannon, Diane Paddision and others -- will shift to CBRE.

CBRE is no stranger to big mergers. Three years ago, it bought the former Insignia/ESG for $415 million. In a statement commenting on the Trammell Crow deal, CBRE President and CEO Brett White said targeted acquisitions have played a pivotal role in the company's strategy.

CBRE plans to finance the acquisition through a new, $2.2 billion senior secured credit facility, according to the investor presentation.
http://portland.bizjournals.com/port...0/daily19.html

[MarkDaMan]

PDC rethinks Oak Tower deal
Development - The City Council and the state's Bureau of Labor and Industries had concerns about the project
Thursday, November 30, 2006
SCOTT LEARN
The Oregonian

Portland Development Commission leaders said Wednesday that they are rethinking a controversial condominium deal downtown amid criticism from City Council members and the state's Bureau of Labor and Industries.

The 26-story, 168-unit Oak Tower project at Southwest Oak Street and Third Avenue is supposed to be the linchpin for revamping the waterfront building area between the Burnside and Morrison bridges.

But it raised three council members' suspicions after the commission agreed in February 2005 to give the land to Trammell Crow Residential Development, 21/2 years after the agency bought the property for $1.2 million.

That decision was based on an appraisal that valued the land as low as negative $2.7 million because of property limitations, including a lack of parking spaces and a requirement for 15 percent affordable units.

The negative appraisal also could have allowed the developer to avoid paying prevailing wages required of public projects, for a potential savings of 3 percent to 5 percent of project costs. That drew the state's labor bureau's attention.

Commission Chairman Mark Rosenbaum said at a news conference Wednesday that the commission and the labor bureau are working on a joint appraisal using a market-value approach that probably will end up in a positive land valuation.

The commission then must decide whether it wants to redo the $48 million project, perhaps removing the affordable housing requirement and switching to rental units instead of condos, Rosenbaum said.

That discussion, including the new appraisal and comments from Trammell Crow, will begin at a meeting Dec. 13, he said.

"We will find out on the 13th whether this deal can be resurrected," Rosenbaum said. "I suspect our efforts to keep 25 units of (affordable) housing may go by the wayside."

The commission also released hundreds of documents and e-mails relating to the deal Wednesday, with Rosenbaum saying it was committed to "complete, total, open transparency." City Commissioner Randy Leonard had been ready to seek council approval to subpoena the city agency, accusing it of holding back key documents.

Leonard said Wednesday that both the negative appraisal and the affordable housing requirements were "complete shams." He said he would welcome a straightforward approach that clearly lays out the pros and cons of subsidizing the development. But he plans to keep pursuing a city audit of the deal and a separate appraisal.

"I'm not willing to just kiss it off at this point and say they've learned their lesson," Leonard said.

The tower is slated for a quarter-block parcel that has sat empty for 22 years, Rosenbaum noted, and would bring as much as $750,000 in property taxes and hundreds of new residents to the area.

With that in mind, the commission may choose to give a developer the land even for a market-rate project, he said.

Tom DiChiara, a Trammell Crow development associate, said the company would like to make the deal work, despite a series of delays. "Whether it would look the same, I don't know," he said.

The rental market has strengthened since the original deal, he said, while the condo market is more uncertain. The new appraised value will determine how much leeway the commission and developer have to craft a new deal, DiChiara said.

The project was first pitched as rental housing, more common in that stretch of downtown. But the commission pressed for condos. Its plan for the Downtown Waterfront Urban Renewal Area calls for upscaling the area, home now to relatively high crime, some run-down properties and a slew of surface parking lots.

Scott Learn: 503-294-7657; scottlearn@news.oregonian.com.

http://www.oregonlive.com/search/ind...an?lcfp&coll=7

[MarkDaMan]

Developer drafted methodology for appraisal
Oak Tower - Opinions on Trammell Crow's actions range from "inappropriate" to "it's very common"
Friday, December 01, 2006
SCOTT LEARN
The Oregonian

A controversial appraisal that valued a piece of downtown land owned by the Portland Development Commission at negative $1.9 million helped the commission argue in favor of giving the land to a condominium developer and against paying a prevailing wage on the planned construction, records show.

The commission released hundreds of records and e-mails Wednesday on the proposed 26-story Oak Tower condominium project, which has come under scrutiny from the City Council.

The records also indicate that developer Trammell Crow Residential drafted the "appraisal instructions" used in the analysis. But they don't show development commission officials specifically requesting a negative appraisal or asking for a specific result.

After the July 15, 2005, appraisal, the commission pledged to give the quarter block at Southwest Third Avenue and Oak Street to Trammell Crow for a 168-unit tower that would include 15 percent affordable housing.

This week, agency leaders said they are reconsidering that decision amid criticism of the negative-value appraisal from council members and the state Bureau of Labor and Industries. The commission bought the land in 2002 for $1.2 million.

The documents released Wednesday show that Trammell Crow's Tom DiChiara drafted "appraisal instructions" for the public-private deal in May 2005. Those instructions included taking a project-specific "land residual" approach that resulted in the negative appraisal. Development commission officials edited the instructions and sent them to appraiser John Ingle, then of PGP Valuation.

Critics have long said the development commission is too cozy with builders. Among those critics is Portland City Commissioner Randy Leonard, who said Thursday that the developer's involvement in the appraisal preliminaries was "inappropriate for a public agency."

But development commission officials said that working with the developer to reach agreement on the appraisal instructions is routine in public-private deals.

"It's very common that the parties agree on what the instructions should be," said John Jackley, the commission's executive operations manager. "It's not that they're telling the appraiser what the outcome should be."

DiChiara said he just wanted the appraisal to get done so the project could move forward. He said he wasn't aware at the time that a negative appraisal could be used to help argue against paying the prevailing wage, generally union-level wages, required of public projects.

The 2005 appraisal was project specific and included deductions for the affordable housing, needed easements and the fact that another party owned critical parking spaces under the property. The other appraisals on the land, including an $850,000 appraisal by PGP in 2002, focused on the market value of the land under its highest and best use.

The negative appraisal has been criticized by a separate appraiser the city hired this year, who valued the market value of the land in its highest use at $1.86 million. The documents released by the commission also show harsh criticism from the Bureau of Labor and Industries, which oversees the state's prevailing wage law. Ingle and PGP have defended the appraisal as following accepted procedures and incorporating realistic costs and land values based on other downtown projects.

Labor bureau officials initially relied on the development commission's assertion that nothing of public value was being given away when they said in 2005 that the project would not have to pay prevailing wages, a decision the developers said would save from 3 percent to 5 percent of project costs.

But the regulators, who were in a larger legal battle with the development commission over prevailing wages, changed their mind when they saw PGP's 2005 appraisal backing up the development commission's assertion. Christine Hammond, the labor bureau's wage and hour division administrator, fired off a March 24, 2006, letter that criticized the use of the residual land value approach.

Hammond noted that the appraisal built in a developer profit allowance of 25 percent of construction costs. It also increased the cost of parking space encumbrances from $200,000 in the first appraisal to $1.12 million in the second, she wrote, helping lead to the conclusion "that this downtown Portland property is not even worth one dollar."

"PDC's suggested conclusion that the property at 3rd and Oak has no value and therefore PDC expended $0 in public funds to finance this project defies common sense," Hammond wrote.

For the Oak Tower project, the two agencies have decided, with Trammell Crow's blessing, to collaborate on yet another appraisal designed to satisfy the state regulators on the true value of the land. That appraisal is due soon, and the commission's governing board is scheduled to discuss the project Dec. 13.

The e-mail record indicates that Andy Wilch, the commission's housing director, raised red flags internally about the commission making the argument that no public money was being used on the condo project.

It's fair to say the property's value is zero when talking about the specific Trammell Crow project, Wilch said Thursday.

"But it's complicated," he said. "I wouldn't expect even our most ardent supporters to blindly accept that there's no value to a property we paid $1.2 million for."

Scott Learn: 503-294-7657; scottlearn@news.oregonian.com.
http://www.oregonlive.com/search/ind...ian?lcg&coll=7

[zilfondel]

This is ridiculous!

If a developer wants to build free parking for buyers in a high rise, of course the underground parking is going to cost a ton of money - but that certainly doesn't nullify the value of the property! Without the property, there is no way to build anything at all... and the developers ARE going to make a bunch of money on this project.

I wish more developers would unbundle parking from their projects - like G/E is doing on their next project over by the urban center. They would probably be surprised at how little parking a downtown project really needs... particularly for low income housing (which I say shouldn't have any parking at all; what's the purpose of living downtown if you're poor and can afford a car?!).

This is just a wiley way for Trammel - which uses old-school development pro formas - to make money on outdated designs. bleh.

[Urbanpdx]

For most of these projects land is about 10% of the cost. It is pretty easy for add-ons like affordable houseing & parking to bump costs by 10%. You would be amazed at how many projects we have worked on in our practice that would not be economically feasible even if the land was free.

[mcbaby]

this sounds like another cursed project.

[tworivers]

I hope they find a compromise that works for everyone, maybe a combination of condo and rental... primarily because I think this tower will LOOK great (especially from the eastside I think it will ease the transition in skyline from Big Pink southwards), add a lot more life to that part of town, and act as a catalyst for more residential development in the area.

[urbanlife]

yeah I really hope this tower happens, it would help create so much needed energy over in that area. Plus it was a decent design.

[CouvScott]

DATE: December 13, 2006
TO: Board of Commissioners
FROM: Bruce A. Warner, Executive Director
SUBJECT: Report Number 06-130
Third and Oak Appraisal Status
EXECUTIVE SUMMARY
BOARD ACTION REQUESTED
None – Information only
SUMMARY
PDC recently entered into a contract with Day Appraisal Company, Inc. to perform an appraisal of PDC-owned property at S.W. Third Avenue and Oak Street in the Downtown Waterfront Urban Renewal Area ─ site of a proposed high-rise, mixed-use condominium project (Oak Tower).
Mr. Jim Barclay, MAI, of Day Appraisal Company, Inc., will be available at the Board Meeting to discuss the status of the appraisal.
BACKGROUND
On October 25, 2005, the Board authorized entering into a disposition and development agreement (DDA) with TCR Pacific Northwest VII, Inc. (TCR) to redevelop a vacant, blighted PDC-owned property at S.W. Third Avenue and Oak Street in the Downtown Waterfront Urban Renewal Area for Oak Tower (the Project), a proposed high-rise, mixed-use condominium project.
The July 15, 2005 appraisal of the property prepared by PGP Valuation, Inc. determined that fair market value of the property using a land residual approach to be a negative value because of encumbrances on the property and a requirement to meet affordable housing and housing density goals required by PDC as part of the project. The draft DDA authorized PDC to transfer the property to TCR for no cost.
On April 24, 2006, the Bureau of Labor and Industry (BOLI) sent PDC a letter outlining what it would take to bring the transaction within the “no public funds” exemption provided in ORS 279C.810(2)(b) which would have the effect of exempting the Oak Tower project proposed by Trammell Crow Residential from the prevailing wage law requirements. The letter specified that BOLI would select an independent appraiser for the developer (or PDC) to employ and that the appraisal instructions would be developed jointly with developer (or PDC).
Board Report 06-130 ─ Third and Oak Appraisal Status
December 13, 2006 Page 2 of 3
Day Appraisal Company, Inc. was recommended by BOLI and subsequently selected by PDC. Following are the appraisal instructions, which were jointly developed by BOLI and PDC.
Appraisal Instructions
SW Third and Oak Property
1. The scope of work is to prepare four copies of a narrative Complete Summary Appraisal for the following described real property (the “Property”) located at SW Third and SW Oak Street site in the City of Portland, County of Multnomah, State of Oregon, in conformance with USPAP, State of Oregon and PDC guidelines:
Lots 5 and 6, Block 30, CITY OF PORTLAND, in the City of Portland, County of Multnomah and State of Oregon, together with all easements appurtenant thereto.
2. The report shall establish the fair market value based on the highest and best use of the Property with consideration to zoning, allowable floor area ratio, current development trends, and existing encumbrances listed as exceptions to title including the following:
Parking Lease
Under a Parking Lease dated December 12, 1997, RG Investments, LLC, leases the garage that existed under the Property for $1.00 per year for 99 years beginning in 1997 with two 99-year renewal options.
Basement Lease
A separate Basement Lease dated December 12, 1997 has the same term as the Parking Lease above and describes conditions for construction of a future building on the Property. The Lease requires an expansion of the basement area if the footprint of the new building exceeds the existing basement area and to provide usable space in the basement of the future building equivalent to the usable space that was previously available.
Basement Renovation Agreement
An Agreement Regarding Basement Renovation and Other Matters, Dated December 12, 1997, sets forth terms and conditions of the redevelopment of the existing basement leased to RG Investments, LLC. Among other conditions, it requires the owner of the new building on the Property to pay for the cost of (1) replacing the 32 parking spaces that formerly existed in the basement of the Property; (2) removing and sealing the windows and finishing the exterior and interior walls on the west side of the Police Headquarters Building; and (3) paying for interfering with 32 parking spaces currently existing in the building for a period of one year from the start of construction at current rates for parking in the adjacent garage.
Garbage and Recycling Easement
An Easement Agreement, dated December 12, 1997 obligates the owner of a future building on the Property to provide a portion of the ground floor of the future building for placement of dumpsters and recycling containers, and
Board Report 06-130 ─ Third and Oak Appraisal Status
December 13, 2006 Page 3 of 3
transport carts for use by the adjacent Police Headquarters Building owners and tenants.
3. The report shall also include a comparative analysis of the appraisal methodologies and resulting differences in value in two previous appraisals of the Property conducted by PGP Valuation Inc. dated January 7, 2002 and July 15, 2005, respectively.
4. If the appraiser determines that a residual land value analysis would also be appropriate for the Property, the appraiser shall report the value they regard to be most appropriate considering all relevant factors that influence value.
5. The report will conform to the following standards:
• Identify and describe the real estate being appraised;
• State the real property interest being appraised;
• Define the value to be estimated;
• State the effective date of the appraisal and the date of the report;
• State the extent of the process of collecting, confirming and reporting data;
• State all assumptions and limiting conditions that affect the analyses, opinions and conclusions;
• Describe the information considered, the appraisal procedures followed, and the reasoning that supports the analyses, opinions and conclusions;
• Describe the appraiser’s opinion of the highest and best use of the real estate, when such an opinion is necessary and appropriate;
• Explain and support the exclusion of any of the usual valuation approaches;
• Describe any other additional information that may be appropriate to show compliance with, or clearly identify and explain permitted departures from the specific guidelines of Standard 1 (USPAP SR1);
• Describe the physical characteristics of the property being appraised;
• Include a statement of the known and observed encumbrances;
• Include title and ownership information;
• Include at least a three year sales history of the property;
• Consider and describe the location, zoning, the present use of the real estate;
• Describe comparables, including describing all relevant physical, legal, and economic factors such as parties to the transaction, source and method of financing, and verification by a party involved in the transaction; and
• Include a signed certificate in accordance with USPSP Standard Rule 2-3.

[CouvScott]

December 13 Meeting Moves to Oregon Convention Center

The Portland Development Commission (PDC) will meet on Wednesday, December 13 at 1:00 p.m. for their second and final public meeting in the month of December and the final Commission meeting in 2006. Due to construction on the bus mall, the meeting will move from PDC’s offices to the Oregon Convention Center, 777 NE MLK Blvd., room C123.

Agenda items include:

Appraisal status on the SW 3rd and Oak project
Adoption of the Ankeny-Burnside Framework Plan
Adoption of the Centennial Mills Framework Plan
Update on the fiscal year 2007-08 budget development process
Public hearing by the Tax Supervising and Conservation Commission on PDC’s budget
The full agenda with document attachments can be found on PDC’s website at http://www.pdc.us/about_pdc/agenda/2006/1213.asp. Citizens interested in attending the meeting can take MAX directly to the Oregon Convention Center or parking is available at the Convention Center.

[CouvScott]

Downtown - A residential building awaits a new land appraisal and wrangling over details

Friday, December 15, 2006
FRED LEESON

The Portland Development Commission and a major developer hope to push ahead with a downtown residential tower despite controversy over the value of the quarter-block lot under it.

But given the changes in the housing market, the 26-story tower proposed for Southwest Third Avenue and Oak Street might turn out to be apartments instead of condos. And the developer probably would have to pay prevailing wages to build it.

"We remain committed," Rob Hinnen, senior managing director for Trammell Crow Residential, told the commission at Wednesday's meeting. "We really believe this project is important."

Similar comments were voiced across the table.

"We'd like to see if there is a way this project can go forward," said Mark Rosenbaum, commission chairman. "This project has waited long enough."

The site, now a hole in the ground, was once part of the city's old police headquarters. The development commission paid $1.2 million for it, but a 2005 appraisal suggesting it was worth a negative $1.9 million for the Trammell Crow project drew blasts from City Hall and the commission's critics.

A different appraiser, James Barclay, is working on a new assessment of the site's true market value. Though his work is not finished, he noted that the negative appraisal was driven by the PDC's desire for maximum density.

A 2001 appraisal listed the value at $850,000, given lease encumbrances on basement parking. Barclay said that figure was based on a "highest and best use" of a building nine to 12 stories tall.

But the 2005 appraisal described a 26-story tower. Barclay said the "land-residual" appraisal method didn't rely on comparable sales but on costs left over -- attributed to the land -- when all other development costs and profits were factored in. Barclay said engineering and construction costs are much higher for a tall tower on a small lot.

Barclay said a negative value using comparable land sales was "beyond comprehension" -- unless the site was environmentally contaminated.

"We clearly have the intent and direction to maximize density," said Andrew Wilch, the commission's housing director. The commission believes that a taller building would add economic benefits to the surrounding neighborhood.

The negative appraisal could have let Trammell Crow pay lower than prevailing wages, since the city presumably would have contributed nothing of value to the public-private deal. Hinnen said the developer was willing to pay prevailing wages "so long as we know in advance" in planning.

Trammell Crow originally planned apartments at the site, but changed to condos when apartments didn't pencil out. Hinnen said national investors are cool to condo towers. "The rental market has gotten better," he said. "We may be able to do market-rate rental here."

The PDC will have to decide how much it is willing to contribute to make the tower work. Taxes from a tall building could repay the land costs in a few years if the commission donates the land.

"We're here to see what's the best use of the property for the good of the wider community," said Bertha Ferran, a commission member.

Two commission members asked about structuring a deal in which the developer would repay the commission if the project exceeded a specified investment return. Hinnen saw that as a tough sell to the pension funds and insurance companies that would be the likely investors.

"It would be a Herculean task to make it work," he said. "But there's no reason we can't try."

The commission called for an update on the project by March 1.

[PacificNW]

Oak Tower Site Re-Appraised

The Portland Development Commission has announced the results of a new independent appraisal of the quarter-block land parcel at Southwest Third and Oak downtown home to the intended Oak Tower project: $1.12 million.

As you may remember, controversy had developed over PDC's previous apraisals, including one for negative $2.7 million. As I understand it, PDC had paid $1.2 million for the property (formerly site of a police headquarters) a few years ago based on an $850,000 appraisal, and afterward spent another $500,000 removing the building and cleaning up contamination. The property was ultimately signed over to a developer to build a 168 unit condominium project on the condition that 15% of the condominiums initially be affordable for people earning 120% of median family income.

Commissioner Randy Leonard and others have been active in seeking more accountability from PDC when it comes to deals like the Oak Tower, and it's hard to argue against the spirit of those efforts. But I also hope that we ultimately see more than PDC and its related issues when looking at the Oak Tower project. As part of the agency's Downtown Waterfront Urban Renewal Area, it's somewhat of a pioneering development - if it still happens - in invigorating this area.

Since PDC already pulled the plug on the moving of Fire Station 1 across Burnside, thereby hampering the blossoming of Ankeny Plaza, the nearby Oak Tower is all the more important. I'm certainly not advocating that the developer be given an unacceptable amount of breaks to get the deal done, but since those issues have already been brought to light and kept in the public eye, I feel motivated to stand up for both the urban planning aspect as well as the fact that the renderings seem to indicate a decent design - or at least one I'll give the benefit of the doubt since the designer is Gary Larsen, one of the city's better and more distinguished architects. I just really think this area near the water ought to be crawling with people, and I hope if this is a good work of micro and macro design that it ultimately makes it to groundbreaking and ribbon cutting. If PDC needs to be held accountable, why not view the new appraisal as a step in getting this project built the right way, not in halting the process?

Posted by Brian Libby on December 27, 2006 | Permalink | Comments (0)