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Monday, March 24, 2008

Me here at last on the ground, you in mid-air

Travelers on I-5 south of downtown Portland have some interesting sights to see between the freeway and the river these days. There's the Cirque du Soleil tent, making its occasional visit to the Rose City. And now when the mime fans are done enjoying the show, they can ride the OHSU aerial tram [rim shot] and visit some hospital wards. Great way to cap off the circus experience.

A little further south, an interesting sideshow appears to be unfolding. Am I just imagining it, or have the cranes that are building the latest ghastly condo towers in the SoWhat District suddenly come to a halt? They sure aren't moving noticeably when I drive by.

Now, logic would strongly suggest the conclusion that there are some seriously heavy construction loans outstanding on the half-built condo projects down there. And it would be surprising if the developers hadn't been counting on a steady stream of condo sales in the occupied buildings to make the payments on the construction loans on the new ones. Now that condo sales have slowed to a weak trickle worthy of an Avodart ad, cash flow must be mighty hard to come by.

Which means somebody's losing some big-time moolah down there. Is it the developers and their partners, or somehow do they get to lay off the cash flow burden onto the city's taxpayers? Maybe our local business reporters could look into this for us. Given the major involvement of the Portland Development Commission, a lot of the details should be open to public scrutiny. Nothing to hide -- right?

UPDATE, 3:00 p.m.: There's a little bit of activity on those structures today, but not much. The cranes are stopped, to be sure.

Comments (13)

I drive by SoWhat every day and I've noticed that things seem to have stopped also. At night, there are not a lot of lights on in those condo towers. I haven't seen any actual numbers, but I would say the completed ones are less than half occupied.

Of course, they were intended to house people who got those high paying biotech jobs.

According to the weekend edition of the Wall Street Journal; there is a nationwide glut of condos on the market. (With even more on the way!) What is happening here is just a symptom of what is happening elsewhere as well. If these developers have similar projects in other cities, they may be having more problems than just here in Portland.

The wife and I are visiting San Diego until Wed.--this post gives me the willies. There are lovely new condo towers all over the place near our hotel--prices reduced today only!!

I wouldn't be surprised at all if the developers just cut their losses and left some of the condos half finished.

Which makes me wonder, does the PDC or the City Council have any authority to force the development of those condos? And if not, can they just condemn the condos, have the city rebuild them, and then sell them at a fraction of the cost?

This is indeed interesting times.

It's one thing to have a condo tower or two unfinished and/or unsold but the greater public nightmare for SoWa is the escalating cost of yet to be built public improvements and the lack of funding for them. As well as the lack of TIF dollars arriving to pay current and upcoming debt service.

SoWa is upside down, big time, in need of a massive bailout. Not the condos but the greater Urban Renewal District plans for public improvements. The Tram may be done and operating but the remaining larger projects are not. The needed traffic/road improvements to avoid imminent area failure requires some $120 million alone.
And now to get started immediately.
The plan's riverbank/greenway, ped/bike bridge over I-5 and new parks will all be needing large amounts of public money from outside the district.

According to PDOT and ODOT the I-5/
Barbur/Ross Island bridge/Macadam choke point will soon surpass the the I-5 Hayden Island problem.

So while the upcoming Milwaukie Light Rail bridge project is under construction
SoWa and the Sellwood bridge will be producing system failure like we have never seen.

Quite the legacy for city officials.

Impressive planning by all of our many bureaucrats.

Developers are not selling what is already built because everybody knows the condos are a poor investment. It is expensive to build 30-story buildings, and what do you get for the money? A view into your neighbor's unit, few amenities, none of the parks that were promised, no schools, affordable housing neighbors, years of future gridlock and construction, and high common fees and property taxes.

Developers pay property tax on this unsold built inventory, but they do not pay property tax as long as the building is under construction, so there is no incentive to finish more units.

Then, since the urban renewal area so badly needs the property tax that would be generated once the units are finished to be the security to issue more debt, the developers have tremendous leverage to get additional subsidies to finish. They can tell PDC that they do not have the money to finish because they aren't selling units, so they need help in the exotic form of the day.

The urban renewal juggernaut has come to Pendleton. They'all want to attract tourists and outside money on the strength of the Round-Up. Articles in the East Oregonian revealing that this is controversial have been replaced by slick pieces likening proposed riverfront projects to "a string of pearls". A local friend who is a USC Journalism major says "Everyone knows the EO is for sale", as are certain individuals at the O, it seems: the ones who have the power to prevent meaningful confrontation of the issues, until it is too late.

Wel, there should be one they are still working on - the retirement tower. From what I heard that has been sold-out before they started construction.

Of course, you can now expect a lot these condos to be turned into senior housing.

Our city business reporters don't need to dig very deep to see an immediate $382 Million deficit for SoWhat.

SoWhat has a maximum TIF debt (taxpayer debt) of $289M. About $90 million of TIF has been spent. There are over $582 Million minimum in public projects that must be completed according to all eight amendments to the SoWhat Agreements and URAC data. That leaves the $382 Million debt...and NOT counting the debt service cost. SoWhat is upside down and Sam the Tram's Tram is not the linch pin to fix it.

The developers will be using the condo fiasco to leverage even more taxpayer dollars to save themselves. There are many parts to the 8 Agreements that require completion of projects per stated dates, with penalties. Already developers are asking for dismissal or delays to those agreements.

There are also continuation of additional "gimmies" to developers and OHSU. Recently Block 49, (just north of Spaghetti Factory)which is to be affordable housing, is funding almost 45% of it's $54Million cost in taxpayer subsidies. All to the benefit of Homer Williams requirement to provide 30% of his projects in housing as affordable.

The taxpayers are substantially paying for that requirement-unless we start to object. Members of the SoWhat URAC are beginnning to object. There is still time, but where is the media?

Dave L: I haven't seen any actual numbers, but I would say the completed ones are less than half occupied.

I picked one at random - John Ross towers at 3601 SW River Pkwy, which was started in 2006 - and did a statistical sampling of owners listed on PortlandMaps.com (yes, this sort of information is still available online). Assuming "Block 35 investors LLC" is the developer, the 50% number is quite a bit high for this project. And that's not counting owners with a different address listed than the unit owned, who I presume may have thought they could flip it for a quick profit.

What are these exactly?

"$582 Million minimum in public projects that must be completed according to all eight amendments to the SoWhat Agreements and URAC data."

There is the Tram, streetcar, riverfront park, 2 block park, pedestrian bridge over I-5, and what else?

I'm really curious. I haven't heard of any other major projects for the district.

For starters, there's quite a bit of transportation stuff, including a major, major re-do of the whole I-5 on and off facilities.

bob, Jack is correct that transportation is a big part. Here is general breakdown of costs with some costs estimated because PDC, PDOT have no accurate guess. Some projects are not even given $$dollar numbers, like Milwaukies Light Rail. This is formulated from identified projects of SoWhat from PDC URAC documents.

a.South Portal $50M
b.I-5 flyover ramp $60M
c. Central/Sheridan St. Portal $20M
d. North Portal $50M?
e. Relocation of SW Moody $55M?
f. Future Streets_North Distict $50M
g. Milwaukie Light Rail in SoWhat $?
h. Macadam Ave. ITS $4M
i. Kelly Triangle $25M?

2)Parks, Open Space, Greenway
a. Central Park $5M ($9M already spent)
b. Ross Island Bridge Park $3M?
c. Neighborhood Park $4M
d. Greenway $40M

3)Affordable Housing
a. 30% of $289M (TIF) $86.5M

4)Development Opportunity Fund/Economic Development
a. Strategic Opportunity Fund
b. Bio-Science Development Strategy
c. Quality Job Program
d. Economic Opportunity Fund
e. Employee Housing Incentive Fund Grand
f. Center/Strategic Land Acquisiton Total
g. Target Industry Development $59M (w/ $13M TIF

5)Gibb St. Pedestrian Bridge $12M

6)Lowell St. Pedestrian Bridge $12M

7)North Portal/Naito Parkway Development
1 Million Sq.Ft. Complex $60M?


All these projects are not including PDOT, PDC, other bureau administration costs, debt service costs, etc.

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