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This page contains a single entry from the blog posted on February 1, 2013 10:45 AM. The previous post in this blog was Low blood pressure? Here's what you need.. The next post in this blog is Sweet and smoky. Many more can be found on the main index page or by looking through the archives.

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Friday, February 1, 2013

Cr-apartments keep coming, in waves

Ah, but they're overbuilding. City of Portland adds only about 5,000 or 6,000 to its population each year. Some of these cowboys are going to lose their shirts. Proving that there is a God.

Comments (16)

Laugh if you want, Jack, but I speak from experience when I warn you that things will get ugly. Firstly, they won't lose money, only because they'll flip those to someone else as soon as they can. More importantly, we have that same sort of boom-and-bust mentality in Dallas, where a flood of apartments doesn't lead to more affordable spaces. Instead, it just leads to apartment managers lowering their standards and milking what they can until the whole place falls apart. The current owners then demolish the place, wait for apartment demand to go back up, and build fresh. These crapartments are just like the ones going up all over Dallas; here, the builders take advantage of the cycle by planning that they'll be decrepit and code-unworthy inside of twenty years. Meanwhile, the perps themselves laugh themselves sick as they count their cash, knowing that even if they have to bail when the market crashes, they'll never be held responsible for cleaning up their messes.

Talk about human warehouses.

Hey, it's all good as long as the cr-apartments are above a New Seasons, right Capstone.

Texas is right. Boom and Bust is the dominant form of investing these days. Whatever market shows the slightest bit of growth, everybody jumps in and the market is flooded with product, much of it cheap and ill-considered. And since Portland has one of the lowest vacancy rates in the country right now, there are a lot of out-of-state buyers ready to throw their money at properties they know nothing about but look good on a pro-forma. Many will get burned.

What I dislike is what will be left behind - over-inflated housing that is expensive for locals to live in, cheap construction that won't wear well (really, do you think a Miami developer understands that OSB doesn't fare well in Oregon rain?), and ruined neighborhoods. Boom cycles are not good for anyone - except maybe the first guys in. Otherwise they act more like a pyramid scheme. Buyer beware. Joe Weston is pulling back because at his age, he's seen this all before and he has the wisdom to foresee the outcome. The younger generation (65 and under) keeps gunning for the next big pot and doesn't know when to "hold 'em."

In a perfect world, the banksters would reel in the lending before anything became too overbuilt.

But the banksters earn big fees and bonuses even by lending to developer-backed LLC's who just give-back the asset when things go bad. And when the "too-big-to-fail" banksters are left holding the bag? Taxpayers bail them out...from a lending perspective, this apartment boom really does have the potential to be 2008 all over again, and I really hope that the banksters were wise enough not to ink a bunch on non-recourse loans this time around.

Better find a chair and sit down before the music stops.

Somewhere there is a smart investor who uses everything the real estate developers say as a contrary indicator.

What a bunch of lemmings. If only they wouldn't destroy neighborhoods as they jump from their financial cliff.

BPS tried to re-brand crapartments as "Low-Car Apartments."

I am here to re-brand the city's plans as
"Twenty Minute Ghettos." No car- no escape.

Metro and the Portland Climate Action Plan have already specified and mandated what's going to happen to Portland and have in effect, sentenced it to death.

If that weren't enough and possibly the real reason why, there's loads of money to be made by big banks and developers in making it come true.

Say goodbye to Portland.

"Say goodbye to Portland."

If only the developers said goodbye to Portland!

PD, don't hold your breath on the banksters having any sanity. This is just like any other boom: the last people standing will be the poor schlubs who waited until the last minute and bought in because everyone else is making money. Either that, or the people who get shafted the most are the ones who were conducting business the same way before the boom. The father of an old friend was caught like that when the big oil bust hit Texas in 1986: he was a commercial builder who had always made his loan payments on time and in order, and had been doing so since the early Seventies. Well, when the bust hit, so many banks were hit with bad loans to frat brothers that they started calling in everything they could to fill the gaps. Ultimately, most of those banks went under, but not after bankrupting legit building companies such as my friend's father: he died over a decade ago, penniless, and the only reason he wasn't homeless is because Texas doesn't allow homes to be foreclosed upon in business bankruptcy proceedings.

As for this being 2008 all over again, try "1990". Remember the big bank crash that required a massive bailout during the Bush the Elder years? Most of that was fallout from the banks going under during the oil bust, as new banks took on a lot of toxic debt from the ones that went under. I know this because my apartment complex from 1986 to 1990 almost literally went through a new owner a month for two years, as each bank that acquired the property went under and was assumed by someone else. That made things really entertaining for such activities as repair and maintenance. Said apartment complex was built so cheaply around 1980 that the individual building sewer lines were blowing out by '88, leaving us with crap geysers in the grassy spaces between buildings every time someone flushed, and the apartment managers had a grand time trying to find who was in charge of paying for repairs from week to week.

Oh, and PD? About those human warehouses? Yeah. We've been getting those for years. Of particular note is one such space that went up a decade ago just outside the Southern Methodist University campus, that was used as a model for all of the others built since then. Thanks to its proximity to SMU, it became the residence of choice for the local drug dealers (as the joke goes, locals refer to the first day of classes at SMU as "The Running of the Coke Dealers"), culminating with a couple of high-profile shootings in the last couple of years. Meanwhile, the facade peels off every few years, which gets fixed only so that it doesn't reflect badly on the rest of the neighborhood. Yeah, you guys really need Portland to be full of those, don't you?

The apartment industry is evolving to a market dominated by "institutional" owners - large investment groups, REITs and the like. the preferred deal is anything over 200 units where the owners feel they can achieve an efficiency that is worth the construction costs and payback. Sure, there are the smaller places going up in neighborhoods where height restrictions and available land restrict large development, but mega developments are more popular than ever, especially with cities that favor TODs. The "Texas Donut" apartment design was created to maximize rentable floor space, parking is limited, interior spaces are pared to the essentials. Goodbye local investor/owner - the ones who might care about the neighborhood or livability of the city. Hello corporate overseer.

TTR, I single out Grant Park Village and Capstone Partners because this project will set an example of why a site (especially one of this size) shouldn't be developed to its maximum height and density.

First, while it meets all of the City's "density objectives", the sheer scale of it simply cannot be serviced adequately by the already-burdened intersection(s) along Broadway. Sure, Capstone can hire traffic engineers to "get them through the process" with pencil magic, but reality will be a very, very, different story.

Second, given the tough location, the developers should have designed a more aesthetically pleasing project instead of this unimaginative, boxy, stick-built tumor. They went for sheer density, and when you "mass" a project consistent with zoning code rather than try to strike a balance - this is what you get. It's horrendous, but LRS is known for that. While the pro-forma might look good, the market will run from this monstrosity when given the choice; it's a human warehouse.

Finally, the biggest problem really is financing. Even if Capstone has a boat-load of equity going in to the project (which I doubt), it will not be built fast enough to catch the current market upswing. It will be two years before those 211 units start to come online and the apartment market will be saturated with many other equally fugly cr-apartments in better locations offering move-in specials in order to keep occupancy high. Capstone will realize sometime before completion that they'll face the perfect storm of crappy quality, really crappy location, and tough market conditions at which point they'll "reposition" the property as "income restricted" pulling the New Seasons "food equity" card to land tax credits and other incentives for meeting the City's objective of "housing equity". This project has Cabrini-Green written all over it.

Single-family home construction, meanwhile, is limited in Portland by a shortage of shovel-ready land and lower sale prices. And condos are now much more difficult to finance.

The irony is that the Metro/Portland planners have brought this on by their insistence on this extreme infill.
So now, shortage of shovel-ready land for single family home construction, shortage of land for businesses to locate here, a park that was sold for housing development years ago and now the Fulton Community Center closed for possible further infill, solar access standards that were changed to accommodate extreme density, neighborhood character and livability degraded, traffic congestion not helped by this at all as mass transit isn't working when apparently the tracks are in to accommodate more infill and much of it tax abated.
This is an experiment gone badly in my opinion. I weep for the livability we have lost and for what I perceive as more to come!

This is an experiment gone badly in my opinion. I weep for the livability we have lost and for what I perceive as more to come!

Look for those who financially benefit from the "experiment" and you'll know why it continues to be conducted. It's now so tightly integrated into government it's become a self-sustaining industry.

The ultimate goal of these planners is the relocation of just about everyone (except for a few wealthy elite) into dense super-cities surrounded by restricted natural areas. Of course Portland doesn't have room for that many people so crunch time to build up right now. Bankrupting us in the mean time is all part of the plan... forcing most into giving up their property to live in subsidized apartment housing.

Anthony,
I am afraid what you have mentioned may very well be the plan.
If those that are planning all this know and perpetuate this, I consider it cruel social engineering. . . forcing people to give up property and to live in subsidized housing.

I am here to re-brand the city's plans as "Twenty Minute Ghettos."

Remember Charlie Hales as Planning Commissioner liked the concept of the "orange juice" test, 20 minute neighborhoods.

We need to remember that Hales was responsible for much of the planning before he left and in my opinion, he needs to be watched closely.


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