RENT COLLECTIONS UPDATE

The table on the right summarizes rent charged versus rent collected by property type on a quarterly basis, from Q1 2020 to present. For the current quarter (Q4 2020), collection data is provided for the months of October, November and December (as of 12/28/2020). We will publish a summary of fourth quarter collection data in our January newsletter.

Retail and office rent collections have held steady since the start of the fourth quarter, with a slight decline in November coinciding with a 14-day statewide “freeze” implemented by Oregon Governor Kate Brown to reduce the spread of COVID-19. During the freeze, which began on November 18, restaurants were restricted to take-out only and retail was limited to 75% capacity. On December 3rd, Governor Brown introduced a COVID-19 Risk and Protection Framework, which limits social and at-home gatherings, restaurants, fitness establishments, retail stores and other entities, based on whether a county is designated low, moderate, high or extreme risk in the COVID-19 pandemic, based on recent infection rates. County risk levels will be assessed and updated every two weeks. All Portland metro area counties and the majority of Oregon counties currently fall within the “extreme risk” category, which limits restaurants to take-out and outdoor dining and restricts retail businesses to 50% maximum capacity. While these limitations pose a hardship for businesses in the retail, service and hospitality sectors, all of our retail tenants remain open for business. Our operations team continues to work closely with and support tenants navigating these unprecedented challenges.

In December, both the percent of residential rent collected (91%) and the percentage of tenants paying rent (92%) decreased. As of December 28, a total of 17 renter households are past due on their current month rent, up from 15 in November. Nine of these households are one month behind on rent. Eight carry balances spanning multiple months, including five households owing three or more months of back rent. During an emergency session on December 21, the Oregon Legislature passed House Bill 4401, extending the statewide residential eviction moratorium previously set to expire on December 31, 2020. The moratorium will now remain in effect through June 30, 2021. House Bill 4401 also established a $150 million Landlord Compensation Fund targeted to smaller landlords and landlords with a higher percentage of unpaid rent. Landlords may receive a payment for 80% of rent in arrears in exchange for forgiving the remaining 20% of past due rent. We are tracking this program and will submit an application for rent assistance to Oregon Housing and Community Services once the program launches.

RESIDENTIAL LEASING UPDATE

The table at the right shows average monthly residential occupancy and lease rates for individual properties and portfolio-wide. In December, portfolio-wide average occupancy and lease rates for stabilized residential properties dropped to 84% and 86% respectively. This decline is largely attributed to an uptick in the number of notices received in late November and December at The George and Àlmr, as well as subsequent move-outs and a handful of lease breaks. Most move-outs are COVID-19 related. During the pandemic, residents are unable to enjoy the amenities and attractions that drew them to close-in, destination neighborhoods, such as Northwest Portland, due to restrictions on social, recreational and business activity. An increasing number of residents working remotely during the pandemic are relocating to suburbs, such as Tigard and Wilsonville, where they can get a larger apartment for a comparable rent. Others are relocating out of state or moving back in with parents. Few residents are relocating within the neighborhood, and most are moving outside of the City of Portland.

With increasing vacancy and ample inventory in Northwest Portland, the Pearl District, the Central Eastside and other close-in Portland submarkets, the leasing environment remains competitive. In this current “renters market”, many projects are offering generous concessions, such as 6 to 10 weeks free rent, as well as incentives ranging from free parking to big-screen plasma TVs and VISA gift cards. To attract prospective tenants and stand out from the competition, we are offering 4 weeks free rent for new long-term leases of one year at our stabilized properties. We have dropped rents at all properties except Fairmount, where the average lease rate in December is a robust 94%. We have also instituted a “zero deposit” at move-in policy at all our properties to make the upfront costs of moving into a new apartment more manageable.

We are actively marketing vacant units at Lyra and Cassi (formerly K-Street Commons), sister properties in lease-up in Northeast Portland. At Lyra, currently 26% leased, we are offering 4 weeks free rent for 2nd floor units and 6 weeks free rent for 3rd and 4th floor units. At neighboring Cassi, following the termination of our lease with Concordia University in the fall, we have converted five leases that originated with Concordia to UD+P leases. We are gradually introducing vacant units to the market as we complete maintenance, repairs and turns.

As we set our sights on a new year, we are excited to cap off what has been an often challenging and always interesting 2020 with some good news. We signed two new commercial tenants in December. Aviv, a restaurant specializing in plant-based Middle Eastern cuisine with a Northwest influence, leased 1,464 square feet of “second generation” restaurant space at Lyra under a 5.5 year term. Aviv will undertake minor cosmetic updates and plumbing work in January and is projected to open in early 2021.

At Àlmr, tenant Bar Diane leased an additional 3,068 square feet adjacent to its existing space with a 10-year term. UD+P will complete landlord work in January. Bar Diane will begin buildout of its expanded bottle shop and deli / market space in February, with plans to complete buildout and open by summer. With this new lease, Àlmr’s ground floor commercial space is now 76% leased.