A company led by the developer of Block 216, the newly opened downtown Portland tower anchored by a Ritz-Carlton hotel, has defaulted on a $127 million loan on a California hotel project.
Developer Walter Bowen faces new financial claims against his Viv Hotel, a 12-story, 326-room structure located less than 2 miles from the entrance to Disneyland. The hotel opened in 2020.
BDC/Anaheim LLC, Bowen’s company, has failed to make timely payments on the $127 million it borrowed to build the hotel, lender 3650 REIT Anaheim LCC alleged. The company filed a notice of default with the Orange County Recorder’s Office on Nov. 13 demanding immediate repayment.
With penalties, fees and legal costs, 3650 REIT Anaheim claimed Bowen’s company owes $145 million in all. The lender states it intends to sell the property at a foreclosure sale if it isn’t repaid.
Bowen’s representatives confirmed the notice of default.
“Due to circumstances related to the hotel market in Anaheim, the separate entity that owns The Viv Hotel was unable to sell or refinance the hotel prior to its loan maturity,” Bowen’s representatives said in a written statement. “Although there are current ongoing discussions with the lender, the lender filed the notice of default on the property to further its rights under California law.”
They said the hotel remains open.
What this means for Bowen’s Block 216, if anything, is unclear. Each of the buildings are controlled by separate limited liability corporations, a structure commonly used to protect complex development projects from legal or financial liabilities of other projects from the same developers.
In November 2018, workers broke ground on what would become the Viv Hotel. The target market was young families on junkets to Disneyland. Some of the hotel’s rooms are furnished with bunk beds for the kids, and its rooftop pool and deck offer unobstructed views of the nightly Disneyland fireworks show.
The hospitality business tanked in the face of the pandemic. Most hotels shut down for months, and many others remained mostly empty.
But by summer 2023, the good times were back, according to local real estate brokers. The brokerage Marcus & Millichap said Orange County hotels boasted a 72% occupancy rate, the second highest among West Coast markets. Visitors to Disneyland, the brokerage said, were nearly back to pre-pandemic levels.
Bowen has relied on individual investors, some of them Oregonians, for hundreds of millions of dollars as he lined up financing for the projects.
Block 216 appeared to defy tall odds just by opening its doors in October. Building the Pacific Northwest’s first 5-star hotel seemed ambitious even before the pandemic. But inflation, higher interest rates, and supply-chain issues complicated the construction process and increased the cost to $600 million.
Bowen officials said the hotel has enjoyed a brisk business. NBA teams have begun using the hotel when in town for a Portland Trail Blazers game.
Opening the doors to the hotel doesn’t mark the finish line for Bowen, though.
And now comes the hard part: convincing the uber wealthy to invest in and live in downtown Portland. In addition to a hotel and offices, the tower includes 132 condominiums that also carry the Ritz-Carlton brand — and luxury price tag.
Bowen and his team must convince deep-pocketed prospects of the notion that Portland still has its mojo, that it still has the quirky creativity and mellow passion that helped put the city on the cultural map in the first place.
And they must do so quickly. Every day the condos go unsold adds to the cost of debt service on the estimated $400 million construction loan that funded the project.
So far, Bowen’s team has managed to close the sale of at least one of 132 condos in the building, records show as of Tuesday.
Documents filed with the Multnomah County Recorder’s Office in November show that a Berkeley, California, couple purchased unit 2404. They got a bargain price — $841,000. The list price for units in the building started at $1.1 million.
In an email, representatives for Bowen said discounts are often granted to early buyers.
“With a new build, such as Block 216, incentives are offered to potential buyers who are among the first to purchase residences and to those who purchase during varying stages of construction,” they said. “While we cannot comment on this individual sale, we can share that incentives were offered to early-stage buyers during the pre-construction and construction phases, as is customary with these types of developments. The building is still under construction, and some incentives are still available to interested buyers.”
-- Jeff Manning; jmanning@oregonian.com
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