t

The Civic

The Morrison

TheCiviCRedevelopmenTa real estate development case study by

Jeffrey Waldo nathen lamband david fiske

usp 523: real estate development iprofessor mattheW Gebhardt, phd, aicpadJunct professor, vern rifer, rifer development

Winter 2015

The moRRison

The CiviC

The CiviC RedevelopmenT

1926 W burnside st.

The Civic Redevelopment is a LEED certified, mixed use, mixed income development located just outside of the Pearl District in Portland, OR. The development was born from a complex public private partnership consisting of developers Gerding Edlen and Home Forward, with SERA Architects and the Hoffman Construction Company. The project was completed in 2007.

table of Contents

Jeffrey Waldo:

Site AcquiSition, BAckground & Project initiAtion

develoPer Profile & AgreementS

Project finAncing

nathen lamb:

mArket AnAlySiS

Socioeconomic AnAlySiS

mArketing, SAleS/leASing, cAPture & ABSorPtion

PuBlic & PrivAte AgreementS

david fiske:

develoPment ProgrAm & PuBlic APProvAlS

Building deSign

green deSign

Project conStruction

mAnAgement And oPerAtionS

all:

critique & evAluAtionS

siTe ACquisiTion, BACkgRound & pRojeCT iniTiATion

The Housing Authority of Portland purchased the 58,062 sq ft lot at the corner of Burnside and SW 19th street in 1997. The Civic Apartments came along with the deal and included 137 units. According to our contact at HAP, the apartments were “affordable housing by default”, and the condition of the building was marginal, having a “scary bunker like feel to it, with parking located in the center.” The City of Portland saw the Civic Apartments as a blighted area and provoked HAP to purchase it and HAP saw the land as a good investment for future affordable housing development. Though we were unable to get the original price HAP paid for piece of land including the Civic Apartments, we do know HAP ran the Civic Apartments for 7 years at a loss. HAP saw no feasible means to redeveloping the land, and the building was too far gone to renovate, so they considered disposition as a last resort due to the loss of affordable housing in the downtown.

In 2004, Gerding Edlen proposed to purchase the lot and develop market rate condominiums. HAP countered the proposal with an

agreement that mandated the inclusion of affordable housing on the site. They agreed and the entire lot sold to GED for $4.5 million. They also tried to purchase the building on the SW corner of 20th and Morrison, but the owner would not sell. Demolition of the Civic Apartments began in the Summer of 2005.

developeR pRofile & AgReemenTs

home forWard, formerly known as the Housing Authority of Portland (HAP), was created by the Portland City Council in 1941. As a public corporation, it serves the city of Portland, the city of Gresham, and Multnomah County. HAP operates as a housing authority to promote, develop, and sustain affordable housing. The Department of Housing and Urban Development is HAP’s main funding source. In recent years, Hap has been developing it’s own equity and assets. Unlike other housing authorities, HAP operates as a developer by combining many different funding sources to construct and manage affordable housing for low income communities. Home Forward is led by an appointed board of commissioners.

GerdinG edlen (Ged) is a Portland based real estate development corporation founded by Bob Gerding and Mark Edlen in 1996. The company was built on innovative design, place making, and community building principles. GED’s projects are a testament to its dedication to sustainable development. The firm specializes in mixed use developments with green building components that focus on creating vibrant urban communities. Exemplary GED real estate with Leed Gold certifications include the Meier and Frank Warehouse, the Brewhouse and Cellar Building, and the Bellevue towers.

sera architects is a design firm founded in 1968 by Bing Sheldon. Originally it started as a collective of creative thinkers that shared office space in downtown Portland. Today it boasts cutting edge projects such as the Burnside 26, the Oregon Transportation Headquarters, and the Savier Street Flats. It still operates as a collaborative including landscape architects, graphic designers, and sustainable development and city planners.

hoffman construction company was founded in 1922 by Lee Hawley Hoffman and is based in Portland. The Company has completed over 150 LEED certified buildings, boasts an annual construction volume of greater than 2 billion in commerce, and claims to be one of the most well-known general contractors in the United States. Some past projects include the Meier Frank Warehouse redevelopment, the Portland Building, and the Gerding Theater.

the civic redevelopment is the product of a development agreement between Gerding Edlen and Home Forward. GED was the sole developer of the project and purchased the entire site from HAP for 4.5 million. HAP donated the 1.5 million of equity it had in the site to acquire Air Rights and condominium ownership for the development of the Morrison Apartments. HAP is the sole owner and financer of the Morrison Apartments. GED financed all other development on the site, including the residential and retail condominiums. Upon completion all condominiums share the space and operate under legal binding of the Oregon Condominium Laws.

pRojeCT finAnCing

sources

Gerding Edlen’s capital stack for the Civic Condominiums and retail was $75,302,542.* Equity financing for the project totaled at $12.2 million, consisting of $9.2 million in shareholder stock and 3 million in New Market Tax Credits. The development’s construction loan was $52 million with a permanent loan of $11.1 million as well. The Civic Condominiums and retail were built on 16 % equity and 84% loan. 15% of the loan carried over after construction as a permanent loan.

Home Forward developed the Morrison Apartments with capital totaling $23,155,556. Equity made up $10.6 million. $8.8 million comes from Low Income Housing Tax Credits (LIHTC). 1.7 million is derived from HAP equity raised from the sale of the land and $141,300 in energy tax credits. The construction loan was made up of $12.5 million. The largest loan was in the form of Series A bonds at $14.7 million made available by PNC Multifamily Financing, Inc. HAP conducted a swap of $6.9 million in LIHTC after construction

was completed making the permanent loan total $7.8 million. The city of Portland supplied $3 million through a Housing Opportunity Bond, and the Portland Development Commission provided a loan of $500,000. Finally, the deferred developer fee totaled $1.2 million. Hap financed the Morrison with 46% equity and 54% loan.*Gerdling Edlen was not forthright with their financing in order to respect the privacy of investors. All reported amounts are taken from a pro forma supplied by HAP and we were unable to acquire GED’s banking information or details about its permanent financing.

uses

Gerding Edlen used a total of $76,349,724 to develop the Civic Condominiums and retail. The land purchase was $4.5 million and predevelopment was close to $5.2 million with architecture and engineering approximately $4 million. Base construction came out to $62 million and other costs such as construction interest, loan fees and taxes totaled $8 million. There was a leftover contingency of $3.5 million. Soft costs were 17% of the total price at about $13.2 million making hard costs $63 million. The loan to cost ratio is 83%.

Home Forward used a total of $23,155,250 to develop the Morrison

Apartments. Predevelopment costs totaled around $9 million including construction loan costs and fees, the market study, developer fees, and architecture. Some information we received points to the Air Rights repurchase from GED as being around $1.5 million, but other documents do not include this. My best guess is the $1.5 million was taken out of the original price for the land sale to GED making it undocumented because this amount never actually exchanged hands. Construction totaled $14 million. Soft costs made up 35% of the total price at $8.3 million and hard costs were $14.8 million. The loan to cost ratio was 54%.

mARkeT AnAlysis

In 2004 Johnson Economics (JE) prepared a market study for HAP and PNC Multifamily Finance INC, which was a major contributor for construction financing for the Civic Redevelopment. The market study did not include an analysis of the condominium market at the time, but did provide a comprehensive analysis of the primary and secondary market areas that surrounded the Civic Redevelopment. JE provided a snapshot of the market conditions at the time, demographic and population forecasts, as well as market pricing projections- pertinent to low-income and affordable housing

development.

The market study was produced during the initial stages of the project when HAP was in the process of securing financing. Because HAP was preparing for two scenarios in which income limits would either range from 30%-60% of MFI, or 53%-60% of MFI for apartment units, JE provided an analysis of demand and capture and absorption rates based on both scenarios. The Morrison currently rents 30 units to tenants at 30% of MFI, with additional units rented to tenants at or below 60% of MFI. Therefore, we will focus on JE’s market analysis for HAP’s first scenario, in which apartments lease to households between 30%-60% of MFI.

morrison

JE delineates a primary market area (PMA) of downtown Portland, and its adjoining NW neighborhoods. The secondary market area (SMA) is comprised of close-in Westside residential neighborhoods, and the close-in Eastside residential neighborhoods. Demand draw was expected to come from the residential neighborhoods in the SMA, while the PMA was more indicative of the potential tenant mix and competitive supply of low-income housing developments (Johnson, 2004).

JE found two proposed projects approved for LIHTC in the PMA with a total of 210 low-income and affordable units available for rent by 2005, and 208 more affordable units from separate developments by 2007. In addition, JE quantified the total number of units from developments in their initial planning stages in the SMA. A total of 386 competitive units were set to open by 2005, though only 210 of them qualified for LIHTC. An additional 232 units were set to arrive by 2007 (Johnson, 2004).

Overall, JE did not concede that the competitive units would be problematic for HAP and PNC to move forward with development. According to JE’s population forecasts for household tenure, age, and income distribution, demand for affordable housing would continue to exceed supply beyond what was set to become available over the next few years in the PMA and SMA. Capture and absorption rates were calculated using forecasts of income-qualified demand in the PMA and SMA (Johnson, 2004).

civic

We have utilized market analyses from the end of 2007 when the Civic condominiums were completed. It is important to note that the condominium market in downtown Portland and its contiguous areas was doing quite well during HAP and GED’s initial planning phases. From 2004-5 the Pearl District (though the Civic is technically part of Goose Hollow) sold about 100,000 condominiums. NW Portland condominium sales were also increasing, while the South Waterfront saw hardly any growth in sales. Interestingly from 2005-6 these trends reversed, resulting in a steep decline of number of condominium sales for the Pearl District, with booming number of condominium sales in the South Waterfront (LeBlanc, 2007).

Condominium developers continued to command the market as sales prices per sq. ft. in all three districts continued to increase since 2004, before leveling off in 2006. By 2007 the downtown area became saturated with condominiums and not enough apartments, causing condominium developers in the midst of construction to convert to apartments. Overall condominium sales were declining, and median prices for condominiums were leveling off as lending regulations became more stringent during the sub-prime lending fallout. By the time the Civic was available for leasing, sales per sq. ft. prices were $427 in the Pearl, and $397 in NW Portland (LeBlanc, 2007).

Overall the retail portion of the Civic saw favorable conditions as the building came online in 2007. The retail market for Portland was considered to be healthy with vacancy rates ranging from 4 to 5%. In the Pearl District, net rent per sq. ft. was between $20 and $35. From 2001 to 2007, Portland saw positive absorption rates, indicating strong market demand for new tenants. Unfortunately, vacancy rates spiked after 2007 and remained relatively high until 2011. This was most likely due to the recession, which might explain why the Civic has had a high turnover rate for retail tenants, as they may have struggled to anchor themselves in a volatile market (Harrison, Norling).

2004 soCioeConomiC AnAlysis

In the PMA, 50% of people employed work in service related industries, while 89% of them live in rental housing. Typically, rents were high compared to incomes, with 40% of households spending more than 35% of income on rent. The growing need for affordable housing was advantageous for HAP for capturing lower income and young singles employed in the service industry (Johnson, 2004). Also, prior to the Civic Apartments demolition, tenant status was telling of the socioeconomic trends in the

pma

• Median household income: $19,027

• Average household size: 1.3 persons

• 42% aged 15-34; 55% aged 35-64

• 75% of residents live alone• 70% earn less than $35,000• 60% earn less than $25,000• 86% rent homes

sma

• Median household income: $38,385

• Average household size: 1.7 persons

• 46% earn less than $35,000• 30% earn less than $25,000• 67% rent homes

PMA. The original tenants were deemed as low-income by default, because they were not living in regulated affordable housing. Overall socioeconomic trends and projections were conducive to HAP’s marketing strategy.

mARkeTing, sAles/leAsing, CApTuRe & ABsoRpTion

civic

GED engaged Realty Trust Group, INC for its marketing techniques in sales and leasing of the Civic condos. We were unable to obtain a market analysis for the Civic from GED, and Realty Trust Group, INC. However, despite the current market conditions of 2007, and the impending economic downturn and housing bubble, GED and Realty Trust were able to fill 70% of the Civic condominiums within six months, and 100% of the units within a year.

April Berg who had been the construction manager for GED during the Civic Redevelopment, emphasized how imperative marketing was for the condomin-iums prior to the recession. The new condominiums were marketed as workforce housing, and geared toward first time home buyers. The median price for a 750 sq. ft. unit was $251,250, well below the average price per condominium in

the Pearl at $456k. Berg recalls the intensity of GED and Realty Trust’s effort to consistently show model units to expedite sales and leasing in an uncertain market. Berg reported that if the team had been even a couple months behind in marketing, sales and leasing would have proved very difficult, resulting in unfavorable absorption rates, potentially turning the entire project upside down.

morrison

JE and HAP expected rapid absorption of units, and were hardly concerned about the competition in the PMA. The building markets itself- as it’s situated right next to Providence Park, with high visibility and superior access to amenities such as public transit, parks, retail, and entertainment. Brand new construction and design also gave HAP a competitive advantage over existing affordable apartment units, as well as market rate apartments in the PMA.

Marketing was geared mostly toward the 25-34 age cohort. HAP hoped to capture young singles, especially students, with its close proximity to Portland State University and employment centers. HAP also hoped to capture seniors looking for affordable housing, and potentially small families for their two bedroom units, because of the Morrison’s proximity to community services, schools and religious institutions.

JE calculated a capture rate of 30% in the PMA, and 9% in the SMA. These capture rates account for the comparable LIHTC supply (210

units) as well as calculated total demand. Interestingly, for absorption rates, Freddie Mac required a demand analysis of the PMA, though JE anticipated much of the demand would come from the SMA where there was a considerable lack of affordable housing. JE’s absorption analysis predicted one bedrooms would lease the fastest. JE projected an overall absorption of approximately 15-18 units a month, based on PMA demand (Johnson, 2004).

The absorption analysis highlights that absorption rates assume no original Civic Apartment tenants will be absorbed post project completion- though, HAP intended to retain at least 50% of the existing tenants that occupied the original Civic Apartments building. After the Morrison was completed, HAP did not end up absorbing the original tenants, but leasing and absorption was very rapid, just as JE predicted, predicated on the lack of affordable housing supply in the Portland metro (Johnson, 2004).

puBliC & pRivATe AgReemenTs

Subsidies were instrumental in making the Civic Redevelopment a feasible project. HAP was able to negotiate and secure close to $9 million in LIHTC from the state of Oregon Housing and Community Services Department, for its service and commitment to increasing low-income and affordable housing stock. The Civic Redevelopment also secured NMTC for revitalizing and activating a low-income blighted area by creating new affordable housing stock and providing

retail space that would supply jobs.Moreover, the Civic Redevelopment was again supported by the state, as the project qualified for Oregon Business energy tax credits for its LEED Gold status.

In addition, fellow public entities such as PDC and PHB supported GED and HAP by providing gap funding in the form of loans, and issuing bonds for the project. Air rights was a major agreement between HAP and GED. Interestingly, HAP had to repurchase its air rights from GED- after GED bought the land from HAP, so that the Morrison could be constructed above the proposed retail condominium at the pedestrian street level. GED and HAP also donated 1% of their funding for public art for RACC, which took form as a structure by artist Lee Kelly in the urban plaza situated between the Morrison and Civic. Finally, HAP was able to provide 12.6% of contracts for construction to MWESB contractors, totaling $6.2 million.

developmenT pRogRAm & puBliC AppRovAls The Civic Redevelopment sits on a 58,062 sq ft site, and the aim from the beginning was to reactivate the site as a mixed-use, mixed-income development. Since acquiring the site in 1997, HAP intended to replace the substandard housing of the Civic Apartments with high-quality affordable housing, and when GED became involved, the two entities negotiated a development program to incorporate market rate condominiums along with ground level retail. Ultimately, the site’s zoning and available FAR/height bonuses helped determine the available space in the two buildings. The site is zoned CXd, or central commercial with a design overlay, and resides within the Central City Plan District. This zone allows for 4 to 1 FAR, and a maximum height of 75 feet, yet the Central City Plan

District offers numerous options for floor area and height bonuses, as well as various means of acquiring floor area transfers. Though the specific options the Civic Redevelopment employed are unclear, the project likely utilized some combination of residential, retail use, “percent for art”, eco-roof, housing, and below-grade parking floor area and height bonuses, and it is probable GED received some amount of floor area bonus through Central City Plan transfers. According to the City of Portland, the entire review and permitting process for the project cost $1,340,900. After incorporating these bonuses, the final program featured 140 affordable units in The Morrison Apartments, including 30 subsidized housing options, and 261 market-rate condominiums in The Civic Condominiums tower. The combined gross floor area of the two buildings ended at 444,843 sq ft, including over 33,000 sq ft of ground level retail, and a resulting FAR of almost 8 to 1. With the height bonuses,

The Civic was allowed to reach 185 feet tall. These public approvals played a large part in the eventual shape of the development, and impacted the design in various ways.

Building design The overall site design was done by SERA Architects, a regular partner of GED, and from the outset they aimed to create a design that would transform the long neglected central city block. The CXd zone required pedestrian oriented design in all new development projects, and this goal was incorporated through a pedestrian walkway between the two buildings. The design team hoped to activate the surrounding streetscape, as well as provide easy access to nearby public transit. SERA organized the “U” shaped Morrison Apartments around a central courtyard providing a green community space. The building’s

shape also allowed maximum daylight to infiltrate the units from both the north and south, as well as minimize shading of the pedestrian street. Units in both buildings were equipped with stainless steel, energy efficient appliances, floor-to-ceiling, operable windows to allow for natural ventilation, and in the Civic, all units contain hardwood floors. The increased density and retail on the site, as well as the lack of

nearby parking options, prompted the site design to incorporate below-grade parking. Though this added substantially to the overall construction budget, it resulted in a site design that did not blemish the area with the bulk of above-grade parking, and allowed for increased residential/retail FAR. Though conflicting numbers were received for this case study, the pro forma provided by HAP states the overall design costs for both buildings were $4,892,850. gReen design From the project’s inception, GED and HAP, along with SERA, integrated green, sustainable design principles for the entire development. The goal was to achieve LEED certification for both buildings, and this came to fruition as both attained LEED Gold. These certifications were largely obtained due to the development’s stormwater management techniques, as well as the aforementioned energy efficient appliances, and embedded event managers (EEM). The site was designed to use 30% less water than a base building, and reduce energy use by up to 22.9% over national standards.*

Stormwater is collected and treated onsite in a multitude of ways. Rooftop rainwater on The Morrison is initially treated by a 20,000 sq ft eco-roof and the landscaped, 3,900 sq ft courtyard on the apartment building’s second level. The roof water of The Civic is also collected and combined with that of The Morrison, and piped directly

to a shared storm filtration system. As much of the site’s rainwater as possible is directed to three water quality bioswales located in the center of the pedestrian walkway. These “enhanced habitat” features relate to 59% of the total site being comprised of green technologies. What water the features do not soak up is then piped to a storm filter water quality vault. In this 34,000-gallon vault, or collection cistern, storm water passes through a series of filters to remove pollutants and particulates.

Of the 34,000 gallons of water in the cistern, the bottom 8,500 gallons are reserved for fire suppression storage (fire sprinklers) with a float installed to prevent the water level decreasing beyond this point. The next 15,000 gallons are reserved for irrigation of the second level courtyard. The remaining 10,500 gallons of the cistern serve as stormwater detention by storing water and slowly releasing it through a set of orifices to reduce the intensity of stormwater leaving the site. The result is an estimated annual reduction in stormwater runoff of 26%.* The overall costs of this stormwater management system amounted to $563,601. The project received an $88,000 grant from the City of Portland Green Investment Fund, as well as $577,916 of state business energy tax credits (BETC) and $93,839 Energy Trust of Oregon cash rebates. The estimated annual cost savings from efficient appliances is $69,679 on electricity and

natural gas, and $8,460 on water, which amounts to 1,649.10 MMMBtu/yr of energy, and 837,128 gallons, or 2,427 gallons per person, of water.* The stormwater management strategies used in the Civic Redevelopment proved so successful that the City of Portland has recommended similar projects incorporate comparable bioswales and rainwater capture techniques to their designs.* - all cost and reduction estimates sourced from City of Portland Green Investment Fund Grantee Final Report

Building ConsTRuCTion The green standards set by the developer and design team carried through to the project’s construction. Hoffman Construction Co. implemented their expertise in LEED building construction, and the techniques can be seen throughout the construction plan. The construction team set a goal of recycling over 80% of construction waste materials, and they nearly accomplished this by recycling 79.15% of all construction and demolition waste, equating to 7,529.04 tons of waste that didn’t go to a landfill.* Construction and demolition began in the summer of 2005, and due to Gerding Edlen’s inability to acquire the abutting site to the west, constructing the below-grade parking facilities proved difficult. To not disturb the abutting site’s foundations, Hoffman was forced to perform a top-down excavation of the site. During the excavation the construction team ran into a surprise: it found Tanner Creek ran directly underneath the site! This unexpected finding did not necessitate an alteration to the project design, though in order to protect the creek, the City of Portland required the installation of a cement covering.

The buildings are framed with highly recycled steel, and Hoffman generally gave preference to building materials that contain a high level of recycled content. In every case possible, they used materials that were extracted and manufactured locally in order to offset transportation energy costs. Hoffman also employed low-toxicity materials and finishes to prevent off-gassing, and they followed dust and contamination containment protocols during the construction. High-efficiency building envelopes were used for both The Morrison and Civic to reduce the need for building cooling, as well as increased wall insulation. According to the pro forma provided by HAP, the total construction costs came to $99,504,974. Unfortunately, it was not possible to obtain a detailed outline of the construction timeline for this case study, though it is known construction completed in November 2007. The construction of the Civic Redevelopment was widely recognized as a success, and the project received the Henry C. Turner Prize for Innovation, an award that recognizes, “an invention, new methodology, or an exceptional display of leadership by a company or individual in the field of construction.” (Turner Construction)* - numbers sourced from City of Portland Green Investment Fund Grantee Final Report

mAnAgemenT & opeRATions An interview with Mark Johnson of Gerding Edlen provided insight into the daily operations management of the Civic Redevelopment. Though he was unable to provide a detailed budget due to privacy constraints, the general order of operations was made clear. The 140 unit Morrison Apartments operates as one singular condominium owned and operated by HAP, and HAP currently employs Income Property Management Co. to provide onsite management and leasing. Based on the pro forma HAP provided, the total income, annually, for the Morrison is approximately $1.1 million. After operating expenses, the net operating income is approximately $634,208, making it an economically successful endeavor in the eyes of HAP.

PREM property management, a firm that manages more than 2.5 million sq ft of residential real estate in the Pacific Northwest, manages the Civic Condominiums, though the 261 private condominium owners own the building itself. Each unit is assigned one below-grade parking stall that acts as a separate ownership right. Condominium owners may buy and sell these parking spots to other owners within the Civic, but not to anyone outside the building. The remainder of the parking is available to Morrison tenants and retail patrons. Onsite storage units are similarly managed, though they are only available to tenants of the Civic. PREM typically acts as intermediary for these kinds of transactions. The retail below both buildings, separated into two separate condominiums, is owned and operated by GED. Since the completion of the site, leasing of the retail has proved troublesome. Only one tenant, Dollar Tree has remained stable since 2007, and some units remaining vacant now. Due to the NMTC used for the development, GED was forced to retain ownership of the retail for seven years. These tax-credits expired in November of 2014, and GED has since been attempting to sell the retail condominiums. While the other elements of this project have been recognized a success, the retail component seems to be the lone factor that has not lived up to the promise of the site. To make decisions on various management commitments, a six member Civic Association Board of Directors is in place. Three of the members are elected from within the tower condominium owners to represent the Civic, two board members are representatives of

HAP, and Mark Johnson from GED represents the retail interests. Together, this board makes decisions on budgetary obligations over common elements of the property, or if decisions are deemed the responsibility of only two, or one party of the membership, this is reflected in the budget.

CRiTique & evAluATion

Jeffrey Waldo

The Civic Redevelopment is a gorgeous, cutting-edge, mixed-use, mixed-income affordable housing development that is LEED certified; it is amazing. From a planning standpoint, I think the development is successful because it achieved urban revitalization while incorporating low income housing and environmentally friendly design. In other words, this project appears to meet all three conflicting goals of Robert Campbell’s sustainable development triangle. I predict this dense, transit oriented development will be a lasting amenity to the city of Portland for many decades to come.The Morrison was a successful development for Home Forward. HAP did not have the finances to redevelop the parcel alone until GED came along. This development met their goals by keeping affordable housing in the downtown area and was even deemed basically “free land” by HAP. I still am not fully clear on how the air rights arrangement and selling of the land to GED worked despite my incessant inquiries into the matter. Given more time, I would pursue information about this and the current financing of the Morrison. I would also like to delve further into the specific affordable housing rates and whether the Morrison apartments are truly cutting edge compared to other low income developments in the city.

We were unable to recover detailed financing from Gerding Edlen, but we were told that all residential condominiums were sold at market price. Financially this is a success, especially under the circumstances: the great recession hit the housing market hard in December of 2008. April Berg said if construction had taken 3 months longer they would have been hurting. The retail side of the condominium is a different story. There have only been a few stable tenants throughout the years. Otherwise, turnover has been

consistent. Some businesses have gone bankrupt at the Civic, while other units have never been rented. We were able to look at a bare bones retail unit while touring the building and I am sure it is a sore sight to GED partners. I am not sure how much money they have lost from the retail, but I have a feeling it is not very significant. They would have preferred to sell the retail condominium from the start, but were unable to because of the time parameters on New Market Tax Credits. I hope this did not burn them out on public private partnerships. Therefore, I believe the Civic Redevelopment was a success in the eyes of Gerding Edlen, especially due to its close proximity to the great recession.

I have further research questions that could apply to the Civic Redevelopment. What effect did it have on the surrounding neighborhood? Using Portland Maps, I summed the market values of each residential condo today, the value of the Morrison, and the current asking price for the retail, which equals $93 million. I am curious what happens when a rundown apartment complex is replaced with an almost billion dollar asset, and whether there are any tangible ways to measure these effects.

nathen lamb

The Civic Redevelopment was a good example of a successful project and partnership between the public and private sectors. GED already had a stellar reputation for successful developments in distinctive design, functionality, and green components for LEED certification and leadership in sustainable development. HAP of course brought seasoned experience to the table with longstanding expertise in developing and managing affordable housing. The two made great partners, with GED’s innovative touch, and HAP’s ability to absorb funding, provide its own equity, and operationalize affordable housing. There were also several other entities that made the project possible, such as Hoffman Construction, Realty Trust, INC., Johnson Economics, PDC, etc. Considering the construction process and top down excavation, HAP had good foresight to budget contingency funding for construction efficiently, and adapt to unforeseeable situations, such as digging up Tanner Creek and excavating under Starbucks.

The project is also a success because it provided much needed affordable housing to the Portland metro. The only issue is that HAP did not retain the original tenants that had been relocated like it originally endeavored to do. Although the Civic condominiums were leased and sold (well below the average price of a condo in the Pearl and NW in 2007) as workforce housing for first time homebuyers; the project could be perceived as the city’s attempt to gentrify the area. Within a few years, the site quickly transformed from low-income and blight, to affordable housing and condominiums (for new residents) with new retail for service industry jobs. Naturally, the retail aims to serve fans from Providence Park, tourists, and Portland residents from the close in Westside and Eastside, to the periphery of the city- who come to downtown for recreation, shopping and entertainment, particularly at night.

Though, from a social standpoint, the upside of the new tenant mix is that it creates social mix of people from different socioeconomic backgrounds, which encourages sense of community, helping to thwart the stigmatization of socioeconomic status brought forth by income disparities and racial polarity (especially in Portland). The redevelopment could also be seen as a success in terms of its leasing and absorption rates. The Civic managed to fill the building just before the economic downturn which could have caused a high number of units to sit vacant, resulting in no return on equity.

The green design of the building was another success that would serve as a great case study for similar proposed mixed-use and sustainable development projects. One overlooked component is the plaza that was part of the redevelopment. The public art adds to the beautification of the city, and facilitates encounter between different groups of people.

Due to restricted access of financial outcomes for the Civic and Morrison, we are unable to deduce whether or not the entirety of the project was financially successful. Obtaining a substantial amount of subsidies also made the project a success as opposed to HAP

having to leverage a greater amount of debt.

The only aspect of the project that has admittedly not been a success, is the retail portion of the redevelopment. Turnover rates have been high, as tenants have struggled to leverage themselves for positive cash flow. Again, being limited in access to retail financial information for the Civic (which the condominium owners possess), we are not able to distinguish whether the rents are too high for tenants to successfully operate, or if the physical location has something to do with the failure of the retail. Though there is some parking provided for shoppers, the underground parking might have visibility issues. Burnside is also a very busy arterial street with many established business and services, which might make it difficult for a new tenant to retain its customer base.

david fiske

All parties involved largely saw the Civic Redevelopment as a success. The Housing Authority of Portland embarked on the project when it initially purchased the lot in 1997 with the intention of redeveloping the site to provide higher quality affordable housing within the urban core. It accomplished this task, and at a much lower cost than initially thought. By bringing in Gerding Edlen as a partner on the project, and allowing them to purchase the land, HAP essentially received the land The Morrison Apartments are located on for free. In talking with the HAP representatives involved in the project, they viewed this arrangement as almost a best-case scenario, and they were proud to have been a part of the development.

From Gerding Edlen’s perspective, the success of the project is a little harder to ascertain. Because we were unable to determine the initial sales price of the 261 units of the Civic Condominiums, it is impossible to know if the tower was economically successful. Yet, based on the high absorption rate, and the fact they accomplished full ownership before the real estate crash in late 2008, I believe the condominium tower was a success. The retail, on the other hand, has largely been unsuccessful, and it has not activated the streetscape in the way it was intended. GED has been unable to

keep the retail units leased, and is now attempting to sell off the condominiums. With that being said, outside of the financial aspects of the project, the representatives we spoke with from GED felt the project was successful. It fulfilled their goals of creating sustainable development in Portland, and it reinvigorated a pivotal urban site in the process.

On that same note, it is clear how the City of Portland views this development. The Civic Redevelopment has been used as a best practice example for how to implement low impact development in the city, and the stormwater management features of the project were highly lauded. The City was also interested in seeing the site redeveloped, and had been pushing HAP to purchase the site for sometime. Having a cutting edge green development that incorporated affordable housing, market rate condos, and a public pedestrian thoroughfare with ground level retail was more than they had hoped for at the project’s inception.

From my perspective, I believe the project is a prime example of how public-private partnerships can bring positive infill development to the inner city. Gerding Edlen could have very easily walked away from the project given all of the complexities of partnering with a public institution like HAP. Yet, GED displayed not only a willingness to participate, but a genuine interest in creating the best possible space for the city. In the process of creating a high-rise condominium tower, GED allowed HAP to achieve its goal of bringing affordable housing to the site. Though the pedestrian walkway and ground level retail have not activated the site like the development team anticipated, it is clearly a vast improvement over the previous condition of the space, and I believe the failure of that element has less to do with the design of the site, and more to do with the lack of pedestrian friendly environments surrounding it. W Burnside street, especially at that intersection, does not lend itself to walking, and the stadium directly adjacent to the walkway is only active during events. I believe, in time, if the rest of the area is made more pedestrian friendly, the walkway will prove successful.

bibliography

Auld, Theresa., Berg, April., Kambur, Pamela. January 26th, 2015. Home Forward. Personal Interview.

Johnson, Mark. January 22nd, 2015. Gerding Edlen. Personal Interview.

“The Morrison, May 2007.” A Monthly Report. Housing Authority of Portland. Provided by Home Forward.

“The Civic Commons LIHTC Application.” August 2, 2004. Provided by Home Forward.

Gross, Carrie., MacColl, Christy., Rodway, Dianne. (2005). City Properties and Realty Trust. The Civic. http://www.bpr.com/downtown-cultural-the-civic.html

Harrison, Synkai A. (2014). Retail Market Analysis. PSU Center for Real Estate Quarterly Report, Volume 8, no. 4, 73-75. Retrieved from http://www.pdx.edu/realestate/sites/www.pdx.edu.realestate/files/07%20Retail%20-%20Harrison.pdf

Johnson Economics. (October 28, 2004). Civic Apartments Redevelopment Market Study: Prepared for PNC Multifamily Capital. Portland, OR.

LeBlanc, Greg. (2007). Downtown Condominium Analysis. PSU Center for Real Estate Quarterly, 3rd Quarter 2007, 50-55. Retrieved from https://docs.google.com/a/pdx.edu/file/d/0BzuqcHYoG9pPYS0yOVJiNndBMXM/edit

Nording, Grant W. (2007). Portland Area Retail Market Overview. PSU Center for Real Estate Quarterly Report, Volume 1, no. 3, 44-47. Retrieved from http://www.pdx.edu/sites/www.pdx.edu.realestate/files/2007%20oar%203rd%20quarter%20report.pdf

City of Portland Green Investment Fund, “Civic Redevelopment Grantee Final Report

L., Pamela. “Basic Pro Forma,” Turner Prize Application. August 11, 2008. Provided by Home Forward.

33.510 Central City Plan District, Planning and Zoning, City of Portland, Bureau of Planning and Sustainability