UD+P News: December 2021

Hospitality INDUSTRY PANEL

On January 12th, UD+P is hosting a virtual panel on the hospitality industry and our North Anchor Hotel project in Lake Oswego, Oregon. Our experts will cover topics ranging from service and operations to design and traveler preferences - focusing on what makes a project successful.

PANELISTS:

Attendees will get insight into how the hospitality industry is adapting to COVID and how the North Anchor Hotel is uniquely positioned to become a destination for visitors from Oregon and beyond.

For additional event details and to register, check out our event page.

PROJECT UPDATES

550 SE MLK - PORTLAND, OR
CENTRAL EASTSIDE

We are vetting potential lenders for 550 SE MLK and anticipate securing financing by the end of Q1 2022. The project was submitted for permit in September and we expect to obtain building permits in March or April 2022.

Truebeck Construction will serve as the project’s general contractor. As you may recall, we worked with Truebeck to complete the latter phases of the Hotel Grand Stark renovation. We plan to kick off construction in spring 2022. 550 SE MLK’s projected delivery date is late Q3 2023.


1201 J STREET - SACRAMENTO, CA
DOWNTOWN

In preparation for a January opening, flex office operator, CENTRL Office, and independent coffee shop, Cora Coffee, are finishing buildout of their spaces. The rooftop tent structure is now installed and ready for our first event, anticipated in Q1 2022. Elevator modernization work is scheduled to start in early January.


LAKE OSWEGO NORTH ANCHOR - LAKE OSWEGO, OR
DOWNTOWN

During a public hearing held on December 7th, the Lake Oswego Redevelopment Agency (LORA) Board approved the North Anchor project development and disposition agreement (DDA). Under the DDA, the redevelopment agency agreed to sell the 46,000-square-foot North Anchor property to Urban Development + Partners for just under $5 million. Additionally, the redevelopment agency will contribute up to $2 million for permit fees, system development charges and construction costs.

UD+P’s development program for the North Anchor site includes two projects: a 66-unit multifamily residential project with approximately 5,700 square feet of ground-floor retail space, and a 77-room boutique hotel with a restaurant and lounge area. The residential project will include eight units of workforce housing with rents affordable to households earning up to 80% of Clackamas County’s median household income.

We submitted the residential project for permit in late September, and expect to obtain building permits from the city in early 2022. The hotel project design is a more complex and time consuming endeavor — we expect to finalize the design and submit the project for permit in Q1 2022.

We will begin interviewing and vetting construction loan partners early in 2022. Subject to securing all required financing, both projects are projected to start construction by summer 2022.

We’re excited to welcome Rabbits Cafe to Cassi.

Sneak peek of flex office operator CENTRL Office’s newest space, opening in January 2022 at 1201 J Street in Downtown Sacramento, CA.

Recent rendering of our Lake Oswego North Anchor residential project’s exterior entry and courtyard.

DISTRICT OFFICE - PORTLAND, OR
CENTRAL EASTSIDE

We signed a new commercial tenant at District Office in December. Revel Indoor Cycling, a women-owned, full-body, indoor spin studio, leased 2,187 SF of ground-floor retail space on the south side of the building with an 89-month term. Currently in the permitting process, Revel is anticipated to open in Q2 2022.


CASSI - PORTLAND, OR
CONCORDIA

In January 2022, Portland-based vegan eatery Rabbits Cafe will open a second brick and mortar location at Cassi, in Northeast Portland. (Former restaurant tenant Aviv’s lease was reassigned to Rabbits in November 2021.) Specializing in healthy and flavorful bowls, salads and smoothies, Rabbits Cafe will contribute to the diverse mix of nearby restaurants, including Podnah’s Pit, Ya Hat, Handsome Pizza, and Seastar Bakery, to name just a few.


ÀLMR - PORTLAND, OR
NORTHWEST / NOB HILL

Bar Diane will open its new specialty market, Negociant, in January. Calle 21 will begin buildout of its 2,488 SF restaurant space as soon as it obtains building permits from the city.


SLATE - PORTLAND, OR
CENTRAL EASTSIDE

Waterproofing repairs at Slate are progressing well. Scaffolding was taken down in December and the work is anticipated to wrap up ahead of schedule in January 2022. Retail tenant Cosube moved out in October following the expiration of its lease. We have contracted broker Tamer Riad, with Debbie Thomas Real Estate, to market that second generation space, along with the vacant retail space at the southwest corner of the building.

COMMERCIAL RENT COLLECTIONS UPDATE

The table below summarizes office and retail collections from Q4 2020 through December 2021 (as of 12/28/2021). Monthly rent collection data is provided for the current quarter and quarterly averages are provided for past quarters.

COMMERCIAL RENT COLLECTIONS SUMMARY

 
 

After stabilizing in the third quarter, office collections have remained strong throughout Q4 2021. We collected 96% of office charges (rent and pass through expenses) assessed in December, up from 95% in November.

Despite ongoing staffing shortages and supply chain disruptions that continue to challenge our retail tenants, we collected 91% of retail charges in December, down only slightly from 92% in November. Our team continues to work closely with tenants that have suffered financial hardship during the pandemic.

residential rent collections update

The table below summarizes residential delinquency (i.e., past due rent) attributed to both current and past residents as of December 28, 2021. Across our residential portfolio, delinquencies of 31 days or longer totaled $92,197 in December. Approximately half of the delinquency is owed by past renters. The other half is owed by current renters. At Fairmount, the property with the largest amount of back rent owed, nearly two thirds of the delinquency is attributed to four renters who have consistently struggled to pay rent since early in the pandemic. Together, these renters—three of whom have applied for rent assistance and one of whom is on a payment plan—owe a combined $25,000 in charges that are 31+ days past due. As described in more detail below, most current renters with significant arrearages have applied for rent assistance to cover their outstanding balances.


RESIDENTIAL DELINQUENCY BY PROPERTY: AUGUST (as of 8/29/21)

 
 

Portfolio-wide, 12 residents have applied for up to six months of rent assistance through the Oregon Emergency Rent Assistance Program (OERAP) to cover past-due rent owed for July through November 2021. In addition to back rent, OERAP will pay for up to three months of future rent for qualified applicants, whose household income may not exceed 80% of the Median Household Income. As you may have read in the news, due to a large number of renters in the City of Portland and Multnomah County seeking assistance, and limited staffing resources, it can take several months for an application to be processed. We will keep you apprised of the status of outstanding OERAP applications and awards in future newsletters.

In December, the Oregon Legislature approved an additional $215 million in funding to extend protections for renters facing eviction and to provide more rent assistance to Oregonians. Lawmakers earmarked $100 million for rent assistance, $5 million to Oregon Housing and Community Services to speed its processing of applications for aid, and $10 million toward a fund to pay landlords whose tenants may not seek or be eligible for assistance. Additionally, they dedicated $100 million toward long-term renter protections and eviction protection efforts. Lawmakers also extended eviction protections for renters who have applied for aid. Senate Bill 891 protects Oregon renters who have applied for rent assistance from nonpayment evictions if they provide documentation of their application to their landlords. Renters who apply for rent assistance and provide documentation to their landlord before July 1, 2022, are protected by this “safe harbor” policy until their application is processed, up until September 30, 2022.

RESIDENTIAL LEASING UPDATE

Leasing activity was tempered in December due to limited available inventory and the seasonal slowdown that occurs during the holidays and colder months. Our leasing team processed 9 lease applications, executed 7 new leases, and assisted with 5 new resident move-ins. Lease turnover (LTO) continues to support rental rate increases across our portfolio. In December, LTO yielded average rent growth of 9.11% — an average rent increase of $127.

In addition to LTO rent growth, we are now tracking rent growth attributed to lease renewals. Lease renewals are subject to state and local regulations that limit how much a landlord can raise rent. In the City of Portland, for example, rent increases are effectively capped at 9.9 percent in a 12-month period. In contrast, in the LTO scenario, a unit can be leased for as much as the market will bear. Accordingly, lease renewals tend to yield more modest rent growth than new leases. Three residents renewed their leases in December. These renewals yielded average rent growth of 4.08% — an average rent increase of $51.

The table below shows average residential lease rates for individual properties, as well as the portfolio-wide average lease rate across all stabilized properties.


AVERAGE LEASE RATES - STABILIZED RESIDENTIAL PROPERTIES

The portfolio-wide average lease rate was 96% in December (as of 12/29/2021), down 1% from November (97%) and 2% from Q3 (98%). With the exception of The George, average lease rates for individual properties experienced little fluctuation and ranged from 93% to 100% in December. With its unique historic character and turn of the century charm, Fairmount Apartments is an exceptionally popular property. When units do become available, they are leased quickly. Throughout Q4 2021, Fairmount has maintained an average lease rate of 100%.

Disruptions caused by waterproofing repairs at The George continue to impact resident quality of life. Two more residents moved out in December. As relayed in our November Newsletter, we are keeping the vacated units off line and will add them back to market about 45 days prior to the work ending. We have offered 8 to 10 weeks free rent to residents who have remained in the building throughout the duration of the repairs.

The table below shows average residential occupancy rates for individual properties, as well as the portfolio-wide average occupancy rate across all stabilized properties.


AVERAGE OCCUPANCY - STABILIZED RESIDENTIAL PROPERTIES

In December the portfolio-wide average occupancy rate was 95%, down one percent from November (96%) and on par with the third quarter. As noted in the leasing overview, occupancy at The George is down temporarily due to waterproofing repairs, which are projected for completion in April 2022.

At this time, we are not offering rent concessions for new leases. We are requiring a security deposit for all new leases.