Portland's urban renewal agency is about to enter the apartment business.

The Portland Development Commission plans to resurrect a project in Lents that caters mostly to residents who can afford market-rate rents. It's set to build and own the project after Williams/Dame & Associates - one of the city's most prominent firms - quietly decided to back out a year after proposing it.

"This project has to happen, as far as we're concerned," said Patrick Quinton, the development commission's executive director. "We're willing to step in to make sure it happens."

If approved, the 54-unit apartment project would be a first for the agency, representing the latest entrepreneurial business move by city officials worried about the long-term financial future of the development commission. Urban renewal revenues are projected to dry up after 2025 unless the City Council approves new districts.

While building more apartments isn't necessarily part of their business plan, officials are devising new ways to make money beyond urban renewal - such as owning parking garages near a planned Convention Center hotel or on the Central Eastside.

But the evolution also carries risk, if not financially then politically.

The decision to build market-rate units comes amid the City Council's declared "housing emergency" and surging rental prices citywide.

Portland's only other foray into market-rate housing hasn't gone well, either. The Portland Housing Bureau owns a market-rate apartment complex in Southwest Portland that's been a years-long political headache, including a fight with Multnomah County over taxes. Rent hikes last year at the Headwaters Apartments approached nearly 20 percent before being rescinded amid scrutiny.

Even so, Quinton defended the decision to move forward in Lents.

While 38 of the units will fetch market rents, 16 will be restricted to people who earn up to 60 percent of the region's median income. That means rents of about $825 for a one-bedroom unit.

"There's zero units if there's not a project," he said.

Despite Portland's white-hot real estate market, Lents residents have spent years pushing for even a hint of redevelopment.



Nearly 9,000 multifamily units were built citywide in 2014 and 2015, although city officials say they don't have neighborhood-level data.

But anecdotally, few new units have been constructed in Lents, a traditionally hardscrabble neighborhood yet to gentrify. As a result, residents have clamored for market-rate apartments, not just city-subsidized affordable units.

Developers haven't been too eager. That's why interest from developers Homer Williams and Dike Dame seemed significant.

Last June, city officials had high hopes when they picked Williams and Dame to help jumpstart Lents with a $15.7 million project at Southeast 92nd Avenue and Foster Road.

Under the original proposal, the development commission planned to loan nearly $4.8 million to Williams and Dame for construction. The Housing Bureau would offer nearly $1.2 million to provide space for low-income renters. The developers would also secure a $9.4 million federal housing loan while contributing just $400,000 in equity.

Notably, the development commission had the option to take control of the project after 10 years - provided the city pay Williams and Dame $440,000 while also taking over payment on outstanding loans.

But in February, costs began climbing. The development commission authorized increasing its loan from nearly $4.8 million to $6.2 million. Total project costs rose to $16.6 million.

Around that time, both sides started reconsidering.

Williams and Dame questioned the amount of work required to develop a project that might provide only 10 years' worth of rental income, Quinton said. Development commission officials questioned why they shouldn't play a bigger role, considering their substantial investment.

"It became apparent to all that maybe we should be taking on the ownership sooner rather than later," said Quinton, whose final day with the development commission is Wednesday. "That was their interest as well as ours."

Williams and Dame won't have to repay any portion of a $1.3 million predevelopment loan from the city. In exchange, they'll hand over work product for the project.

"We have always believed in the future of the Lents neighborhood," the company said in a statement. "Upon successful completion by the city, this project will make a major contribution to the area's revitalization. We are proud to have been a partner in that effort."

In another first, officials plan to move forward by creating a limited liability company made up exclusively of the development commission - a move that Quinton said allows the agency to take out non-urban-renewal debt for the project.

It's not clear where the final price tag will end up. Officials said they will present a new funding plan to the board Aug. 10, with the development commission now planning to cover $15.3 million and the Housing Bureau maintaining its $1.2 million commitment.

The board approved the plan 5-0 at Wednesday's meeting.

Meanwhile, city officials continue negotiating with Palindrome Communities on a separate, $52.2 million mixed-use project for Lents, which includes $20.5 million from the development commission and the Housing Bureau. They're also working on deals for an Asian health and service center and more mixed-income apartments to be developed by ROSE Community Development.

Together, the projects would represent a huge achievement in Lents, an area that Mayor Charlie Hales pledged to redevelop.

Cora Potter, who tracks development issues for the Lents neighborhood association, praised city officials for helping shift perceptions about Lents and sticking with the project.

Their "job is to change the market, not wait for the market to do what it's going to do anyway," she said. "They finally took that to heart, and that's what they're doing now."

-- Brad Schmidt

503-294-7628

@cityhallwatch