Is it time for the city to fold on the "Heritage Building"?
Summer's almost here, and that means it must be time for Portland taxpayers to get soaked some more on the infamous "Heritage Building" deal over on MLK. This one has been a financial bomb since forever -- long before we first blogged about it in October 2005. Here's what we reported then:
[L]ast week [the Portland Development Commission] announced that they had closed on the sale of the bombed-out "Heritage Building" on NE Martin Luther King Jr. Boulevard to a group of developers for, literally, one dollar. This is property that the PDC paid $400,000 for in 1999 -- now gone for a buck. That and $2.4 million in low-interest loans is supposed to get the new owners cracking, finally, on turning the property into something useful, after years and years and years of talking about it.By last June, things had deteriorated quite a bit:
Back in 2001 (when the property was still being called the Weimer Building), the story was that the PDC was going to sell the building to a developer for around $500,000.... "But just like everything else, I guess those crazy dreams just kinda came and went."
The [PDC] made a $2.45 million sweetheart loan to the developers to whom it was handing the place. There was a senior construction loan with Albina Bank, too.Last year, the talk was that Bank of the West was going to take over the Albina loan, but apparently that never happened. Instead, the developer reportedly went bankrupt. And now there's talk of the PDC taking over the Albina loan -- essentially, paying off the first mortgage -- to try to salvage the $2.45 million that it has into the deal as lender on a second mortgage. The latest from the O includes this:
Well, the project's a flop, and now both loans are in default. They're rearranging the deck chairs with a new senior lender this week at the PDC. If the new private loan doesn't get finalized pretty soon, a foreclosure sale is scheduled for less than a month from now.
The [PDC] will consider buying a private bank loan to avoid a second foreclosure on a key redevelopment project....No word on how much is still outstanding on the loan, or how much the PDC is planning to pay to buy that paper. Last year the balance on the Albina loan was in the neighborhood of $2 million.
The development company, the Heritage Building LLC, finished the work in September 2007. Since then, the company has defaulted once on the loan with Albina Community Bank, and the company filed Chapter 11 bankruptcy last year. The building remains just 56 percent leased, according to the PDC.
Commission officials, worried about another default, say they want to take over the Albina Community Bank loan to get the rest of the building leased and "protect its own investment in the property in the event of another loan default," according to a staff report....
[Eric] Wentland [manager of the developer] said his company has restructured and re-emerged from Chapter 11. He said he has letters of intent from more tenants.
But he said neither his company nor the tenants can afford to pay to finish out the space.
Let's see: We taxpayers paid $400,000 for the building, and shelled out another $2.4 million more in loans for construction. That's $2.8 million of tax dollars (and maybe more that the media hasn't reported) poured into a building that isn't happening, and probably never was going to happen. So now the call is to pungle up another $2 million so that the developer can string the PDC out even further?
And then what? More "loans" to finish the building so that additional tenants might actually be arm-twisted into moving in? How many hundreds of thousands -- or even millions -- are the additional improvements going to cost?
Maybe it would be better to let the bank take the thing over. If the building's worth more than the balance on the Albina loan (say, more than $2 million), the taxpayers will at least get something back on the $2.8 million they have sunk into this turkey. That might be as good as can be expected.
After an entire decade of struggling with this property, the PDC and its developer pals haven't been able to get anything going with it. Only a fool would think that somehow things are going to improve, especially in this economy. Dropping another dime of public money on this project -- much less more millions -- would seem like a highly questionable move.