VOLUME 26 NUMBER 6 APRIL-JUNE 1996 RESIDENTIAL PORTLAND, OREGON PROJECT TYPE

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1 VOLUME 26 NUMBER 6 APRIL-JUNE 1996 RESIDENTIAL PEARL LOFTS PORTLAND, OREGON PROJECT TYPE A 27-unit, new loft-style residential project located on the north edge of downtown Portland. This infill redevelopment project is the first phase of a 39-acre master-planned development on a former rail-yard site. Targeted to middle-income residents, Pearl Lofts features a broad selection of unit configurations and price ranges. SPECIAL FEATURES New construction, loft-style condominiums Broad price range, targeted to middle-income buyers Interior garden courtyard Selection of nine separate floor plans Secured off-street parking DEVELOPER Patrick R. Prendergast Urban Homes, Inc. Prendergast & Associates, Inc. 333 SW Fifth Avenue, Suite 200 Portland, Oregon ARCHITECT Tim Merrill Church & Merrill Architects 30 NW First Avenue, Suite 201 Portland, Oregon LANDSCAPE ARCHITECT Craig Kiest Huntington & Kiest 2892 NW Upshur Street Portland, Oregon CONTRACTOR Walsh Construction Co SW First Avenue

2 Portland, Oregon

3 GENERAL DESCRIPTION Pearl Lofts is a condominium complex designed and developed to offer residents loft-style residential living environments in a newly constructed 27-unit multifamily structure. The project's apartment units include features commonly associated with adaptive-use residential lofts, including high ceilings and expansive windows, while simultaneously offering the value-added amenities and finishes of new construction. Situated on a site formerly used by the Burlington Northern Railroad for freight storage, Pearl Lofts is located within Portland's Pearl District, a rapidly gentrifying urban neighborhood, on the north edge of downtown. The Pearl District, formerly a warehouse and industrial district, now includes a combination of residential, retail, arts, and industrial uses and has become one of the fastest-growing residential districts in the Portland market. Pearl Lofts is the first phase of the 39-acre Hoyt Street Yards master-planned development. Current plans for Hoyt Street Yards include the development of 3,000 residential units and approximately 200,000 square feet of retail space at buildout. Hoyt Street developer, Pat Prendergast of Urban Homes, Inc., initiated development on the Pearl Lofts parcel because the site abutted existing development that provided an urban context. By contrast, his holdings within the interior portion of the Hoyt Street Yards property are encircled by vast tracts of empty rail yards. Infrastructure costs for the Pearl Lofts site were also less than those for interior parcels, because the parcel was serviced with streets and a public driveway. The project, with its numerous floor plan variations and reasonable sale prices, allowed the developer to effectively evaluate and respond to an uncertain market while stimulating Hoyt Street's residential development initiatives. DEVELOPMENT PROCESS The Hoyt Street parcel was first master planned by Glacier Park, the real estate subsidiary of Burlington Northern. Prendergast, the site's current owner and developer, amended the original 1980s plan, which called for a heavy dose of office development, to give it a residential focus. Pearl Lofts, as the first phase of the 39-acre master-planned development, was a "testing-the-waters" project. Although several Pearl District warehouses had been converted over the last five years to loft apartments, Pearl Lofts was the first new construction in the area of a for-sale residential product. Therefore, the developer opted to build at relatively conservative densities until the depth of market interest in new loft condominiums was better known. Density was ultimately determined by parking needs. The number of units, 27, was derived from the number of cars that could be accommodated on site without building structured parking. To minimize risk, the developer decided to build housing only, and to refrain from adding street-level retail shops; however, streetlevel units were designed to be readily converted into retail use. DESIGN AND CONSTRUCTION As with many development efforts in urban settings, infrastructure construction for the Pearl Lofts was complicated. Old utilities that were documented with dated or defunct records made the task of connecting water and sewer lines more involved than anticipated. Consequently, the costs for engineering and construction work were significantly higher than first projected. Most of the Pearl District's early loft buildings were renovations of old, derelict, brick warehouses. Loft design was generally spartan and industrial in character. Although Pearl Lofts is encased in the traditional red-brick industrial box, it is more of a hybrid design. Here, the voluminous spaces of traditional lofts are combined with such features as hardwood floors, spacious closets, and carpeting in the sleeping areas to create a softer, more residential character. In traditional lofts, the walls are typically raw concrete or exposed brick. Here the walls are painted and textured. Likewise, the use of exterior detailing pediments above the front doors, brick framing around the entryways, canvas awnings, and wrought-iron window

4 boxes further emphasizes the residential ambience. In a city that is famous for its long, gray winter days, people crave natural light. Thus, a main design goal was to make the most of every last ray of light. To accomplish this, the first-floor units feature plentiful, expansive windows that are accommodated by 12-foot-high ceilings. In the second-floor loft units, ceilings rise to 17 feet. The street-level units are actually flats, for there is no variation in floor height. The goal, however, was to create a feeling of spaciousness within a relatively small area. Additional light comes from the landscaped interior courtyard. The four largest units have balconies overlooking the courtyard. A significant complication was the problem of sound transmission, which was a concern, because Pearl Lofts is a multifamily building. To minimize sound vibrations, special construction techniques were applied to make the concrete floors more rigid, and they were encased in rubber gasket membranes. Likewise, double-wall instead of single-wall construction was used to reduce sound. The selection of different unit designs limited the opportunity to repeat unit configurations, making it difficult for the contractor to work out a sequencing schedule. These inefficiencies made for higher contractor fees. The ability to custom design individual units, however, was one of the strong selling points of the project. Prospective buyers could select from nine different floor plans, plus various wall paints and carpeting, and were offered a selection of more than 15 different laminates. They could also upgrade such items as bathroom tiles and kitchen counters. Buyers could even determine the location of recessed light fixtures and outlets. One parking space is allotted to each residence. Eight surface spaces on the west side of the building are assigned to the smaller residential units; covered garages provide the remaining eighteen spaces. No parking is reserved for commercial tenants. FINANCING The financing strategy was largely determined by two self-imposed requirements: (1) keep pricing as low as possible to appeal to a broad market segment and (2) presell 50 percent of the units before construction started. These requirements created a sequencing problem with respect to financing, for there was no way to gauge how long it would take to sell 50 new urban lofts in pioneer territory. Prendergast decided it would be easier to finance this first project privately and created a limited partnership of investors. So that purchasers could qualify for financing from Fannie Mae, the developer agreed to limit commercial uses to no more than 10 percent. Pearl Lofts houses a number of commercial tenants, including a real estate broker, engineering consultant, and talent agency. An additional Fannie Mae requirement was that 70 percent of the units had to be owner occupied. MARKETING The developer's original thought was that the lofts would appeal mostly to first-time homeowners who were renting in the area. They discovered, however, that the market was far more extensive. Suburbanites from Beaverton and Lake Oswego were equally drawn to the project. Single men and women both young professionals and retirees claimed more than a third of the units. Because of the uncertainty of the market, the pricing strategy was set deliberately broad, spanning a range of $79,000 to $159,000. The initial goal had been to presell 50 percent of the units; in fact, nearly all the units sold before construction started.

5 Pearl Lofts was the first such project in the neighborhood, so prospective buyers made their selections based only on construction drawings. Marketing was mainly through newspaper adds and site signage. An on-site marketing office operated seven days a week. EXPERIENCE GAINED In the case of a large-scale development where the depth of market interest is relatively unknown, it is prudent to start out with small projects and build incrementally over time. Thus, the density of Pearl Lofts was deliberately conservative. The offering of nine different unit types and 15 different laminate selections, which essentially allowed purchasers to custom design their units, undoubtedly boosted early sales. However, the developer cautions that too many choices tend to confuse customers. In addition, this approach made it difficult to sequence the contracting schedule, thus driving up construction costs. In retrospect, balconies would have been a better investment than 17 foot-high ceilings. The advantages of high ceilings are many the ability to construct taller windows to create more light, spaciousness, etc. However, there is a certain threshold beyond which the higher ceilings fail to support commensurably higher sales prices. Balconies, on the other hand, do command higher prices per square foot.

6 PROJECT DATA LAND USE INFORMATION Site Area: 0.5 acre Total Dwelling Units: 26 Total Retail Units: 1 Gross Density: 54 units per acre Off-Street Parking Spaces: 26 (18 in garages; 8 in off-street alley; retail unit has no parking) LAND USE PLAN Square Feet Percent of Site Building footprint 18, Roads/paved areas Common open space 2, , Total 24, % RESIDENTIAL UNIT INFORMATION Unit Type Unit Size (Square Feet) Number of Units Range of Initial Sales Prices A $98, ,500 B , ,500 C 1, ,000 D , ,000 E 1, , ,000 F 1, , ,000 G ,000 H ,000 I 1, ,500 Retail 1, ,500 Summary of Residential Unit Types: 10 first-floor flats with 12-foot ceilings size range: 687-1,079 square feet; 16 second-floor lofts with 17-foot ceilings, plus loft master bedroom and bath size range: 1,241-1,551 square feet. DEVELOPMENT COST INFORMATION Site Acquisition Cost: $149,418 Site Improvement Costs: Demolition/excavation/grading 16,540

7 Sewer/water/drainage 28,766 Paving/curbs/sidewalks 54,860 Landscaping/irrigation 7,995 Lighting/power 78,945 Phone 985 Fees/general conditions/insurance (Minus reimbursement from djacent project for half of costs or alley/gates/utilities) 11,050 (-98,033) Total $101,108 Construction Costs: Sitework $154,585 Concrete 107,770 Masonry 133,560 Metals 79,564 Carpentry 359,558 Thermal and moisture protection 50,202 Doors and windows 95,383 Finishes 477,072 Specialties 18,619 Equipment 32,448 Furnishings 58,743 Mechanical 176,027 Electrical 116,920 Fees/general conditions/insurance 214,549 Total 2,075,000 Soft Costs Architecture $50,000 Marketing 15,000 Legal/accounting 25,000 Appraisal 5,000 Environmental 5,000 Soils structure 2,000 Survey 10,000

8 Permits 50,000 Title fees 5,000 Construction interest and fees 93,628 Overhead 35,000 Miscellaneous 5,000 Total 320,628 Total Development Cost: 2,646,154 Total Development Cost Per Unit: $98,006 Construction Cost Per Square Foot: $68.44 (excluding site improvement costs) DEVELOPMENT SCHEDULE Site Purchased: December 1993 Planning Started: October 1992 Construction Started: September 1993 Construction Completed: August 1994 Sales Started: January 1993; 81 percent sold as of July 1993; 93 percent as of September 1993 Sales Completed: August 1994 DIRECTIONS From Airport: Take I-205 south to I-84 west. Proceed about five miles to I-5 north, then take I-405 across the Fremont Bridge. Take the Everett Street exit; turn left on Davis Street, then left on 10th Avenue. Go four blocks to Hoyt Street. Pearl Lofts is located at the intersection of NW 10th Avenue and Hoyt Street on the northwest corner. Driving Time: 20 minutes in non-peak-hour traffic. The Project Reference File is intended as a resource tool for use by the subscribers in improving the quality of future projects. Data contained herein were made available by the Development team and constitute a report on, not an endorsement of, the project by ULI - The Urban Land Institute. Copyright 1996, 1997, by ULI - the Urban Land Institute 1025 Thomas Jefferson Street, N. W. Ste. 500w, Washington, D. C

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