Condos attract national firms

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Condos attract national firms

By Wendy Culverwell

The Business Journal of Portland

Updated: 7:00 p.m. ET Jan. 22, 2006

The next big thing in Portland's booming condominium market may not be granite countertops, stainless steel appliances and art glass sinks.

It could be big national builders looking for fresh territory after riding booms in hot spots like Miami.

Developers are usually reluctant to discuss their partnerships, but at least two high-profile projects in Portland have out-of-state sponsors.

The Waterfront Pearl near Albers Mill is being developed by Pemcor Investment Corp. of Vancouver, British Columbia, and Grancorp Inc. of Seattle, who teamed with the property owners, Sam and Verne Naito, to get the project going.

Trammell Crow Residential, a well-known apartment developer and manager, launched its first Portland condominium project, The Vaux, last year.

Out-of-town developers will increasingly call on Portland, said Marty Kehoe, one of a handful of locally based developers who have largely had the Rose City condo market to themselves.

It's a matter of moving to new ground, said Kehoe, who has developed homes and condos across the metro area for two decades. He is currently working to convert The Terraces at Lake Oswego apartments into a condominium complex, and the Cambridge, a new top-of-the-market project in Northwest Portland.

Jeff Myhre, principal of Myhre Group Architects, seconds Kehoe's assessment. Big players have quietly landed in Portland.

Myhre, whose firm specializes in multifamily projects such as hotels, resorts, apartments and condominiums, said condos account for a significant portion of his firm's work right now.

Tertiary markets such as Portland; Boise, Idaho; Reno, Nev.; and Sacramento, Calif., are experiencing a "tremendous" influx of people interested in developing, he said. But big developers prefer to team with local companies.

"A lot of the projects you see have national organizations as participants, but they are not the name associated with the project. Many of them intentionally want to maintain a lower profile in order to avoid the Wal-Mart syndrome," he said.

It's no surprise developers would want to build here, even if they aren't from here. Job growth, an improving economy and continuing demand for condominiums are attractive lures.

"The developers and the builders at the national level are interested in profitability just like the rest of the business community is. If they can make a buck in Portland, they will do it," Myhre said.

Not everyone agrees.

Kirk Taylor, senior vice president for investment properties in CB Richard Ellis' institutions group, doubts Portland is big enough for the big guys.

"Our deals are too small," he said. "Twenty-five million dollars is nothing for them."

Taylor covers a territory that extends from Seattle to San Francisco and as far east as Las Vegas. Portland, he said, lacks the heat that causes people to swoon over condo real estate -- Portland buyers tend to hold onto their property, not to flip it.

So-called "investor" buyers, who reserve units in unbuilt properties, then sell them when the project opens, aren't unheard of, but local builders including Kehoe do their best to discourage that kind of activity.

Most of all, Taylor said local developers have a natural advantage in the most important aspect of construction: identifying and acquiring land.

Nationwide, condominium-style development is no longer confined to highly urban settings such as Miami or New York.

Liz Ptacek, vice president for the research and valuations group for PNC Real Estate Finance in Pittsburgh, sees evidence of condos in nontraditional spots -- like the loft her own father bought in Cedar Rapids, Iowa.

Development moves from established markets and into the fringe because of the land prices, said Ptacek, who wrote extensively last summer on the factors that influence the condominium market.

Nick Buss, a senior vice president with the same group at PNC Real Estate Finance, said his group is actually evaluating a proposal from Portland, though he couldn't elaborate.

He tended to agree with Taylor, that condominium building is a local game. "My experience so far is we haven't seen a lot of migration of developers.

Condo developers particularly tend to stay fairly local."

One major caveat is the high-rise essential project, like the ones being built in Portland along the Willamette River. Such highly complex projects require a narrow set of experts.

"Those guys tend to move around," he said.

In fact, that may place Portland in a different role -- exporter of developers. The force behind the South Waterfront -- Williams and Dame Development and Gerding/Edlen Development Co. -- are working on a prominent project in downtown Los Angeles near the Staples Center.

Older, frequently neglected downtowns, provide fertile ground for developers. Los Angeles, Buss said, is a classic example.