Walt Bowen’s year of reckoning has arrived.
This is the year the Portland real estate developer is to deliver his Ritz-Carlton building, a massive $600 million gamble that some have come to view as a high-stakes referendum on downtown Portland itself.
Bowen and his team have managed to keep construction on track — city building officials say they expect the tower at 900 S.W. Washington St. will be ready to partially open as soon as May — and his lenders on the team. That’s no small achievement given the historic events out of his control that have sapped the vitality of downtown Portland since construction began in 2019.
Now comes the really hard part – selling the building’s 138 condos at price tags never before seen in Portland, attracting guests to stay in the city’s first five-star hotel, and finding tenants for the building’s five stories of office space.
“The Ritz is kind of the bellwether for how our city is performing,” said Blake Hering Jr., a veteran of the local real estate scene. “All eyes will be watching to see if this five-star landmark can spark hopes of recovery.”
Some see reasons for optimism.
Stephen Fitzmaurice, a Portland Realtor and condo specialist, predicts Bowen could pull it off precisely because of the uber-exclusive target market.
“The upper half of the top 1% have more money than they ever have,” Fitzmaurice said. “I actually wouldn’t be surprised if the condos sell out because they are targeting that niche.”
Bowen declined to comment for this story. But amid the race to the finish line, recent filings shed some light on Bowen’s financial capacity to keep the project on track.
Last month, Block 216, Bowen’s company leading the Ritz-Carlton project, filed an amended Form D with the U.S. Securities and Exchange Commission indicating that the company is continuing to raise money as part of a private offering that began in 2019.
The document indicates that Block 216 has raised just over $60 million of the hoped for $120 million. The “total remaining to be sold” is listed as $59.7 million.
It’s not entirely clear whether the filing denotes a significant new initiative to raise private capital or whether it is just paperwork required by the U.S. Securities and Exchange Commission. The one-page document offers little in the way of explanation.
Rohan Grey, a law professor at Willamette University in Salem, said so-called Regulation D offerings are attractive precisely because of the minimal disclosure requirements. The tradeoff is that only wealthy investors, who meet certain minimum income and net worth standards, can invest.
There are few if any obvious signs of trouble with the project. There are no construction liens filed by unhappy contractors, no lawsuits from disgruntled investors or unpaid lenders.
Homer Williams, another prominent Portland developer who’s discussed the project with Bowen, said Bowen has kept the project on track with large infusions of his own money.
“He’s all in on this,” Williams said.
Bowen’s company has been busy selling significant assets in recent years, though it’s unclear whether the proceeds are going into the Ritz project.
Last month, BPM Real Estate Group, one of Bowen’s companies, sold a large senior living complex in Bend to Beaverton-based Touchmark. The price was $57.8 million, according to Cushman & Wakefield, the commercial real estate brokerage that represented BPM in the deal.
The Alexander was the last senior living facility in BPM’s portfolio. The company sold six other senior living centers in Oregon, California and Oregon in 2019. Two years later, BPM sold a Southwest Portland apartment building for $55 million.
BPM followed up with the $133 million sale of a portion of the Broadway Tower.
Condominiums are crucial to the Ritz-Carlton tower’s success. Unlike the hotel and offices, condo sales could provide a significant slug of capital in fairly short order.
The Portland condo market has gone from red-hot to tepid over the last seven years. The average sales price in 2022 was $593,928, down 12% from the year before and the seventh consecutive year prices have declined.
But as Fitzmaurice noted, the Ritz-Carlton is going for an entirely different demographic. Its condos are on the market for $1,500 or more per square foot. Meanwhile, the rest of the city’s condos were sold on average for $499 per square foot, according to a market analysis from Inhabit Real Estate.
Terry Sprague, a Lake Oswego real estate broker, has been hired by Bowen to lead the Ritz-Carlton condo sales effort. Sprague, like Bowen, did not return phone calls. But on one of his social media pages on Feb. 20, he trumpeted strong demand for the Ritz condos, saying 30 units were now under contract.
Dave Van Nus of We Know Portland Real Estate attended a Ritz-Carlton sales meeting in recent weeks.
“We were told a third of the units were under contract,” he said.
Bowen has clashed with city officials over whether the new building would comply with the city’s inclusionary zoning rules by making 20% of the condo units affordable to a moderate-income family – an extraordinary discount on their multimillion-dollar price tags.
As first reported by The Oregonian/OregonLive in February 2022, Bowen signed an agreement with the city indicating he would make the units affordable, even as he indicated elsewhere he planned to pay a fee instead, an alternative allowed under the city’s rules.
The ambiguity allowed the developer to postpone the day his company would have to make the payment. Normally, if a developer opted not to provide the affordable housing within the new development, the payment would come due along with its final building permit. The Ritz project got its final building permit in April 2021.
The city initially pegged the fee as $8.3 million. Since then, after getting more detailed information from Bowen’s team about the uses of all 35 stories of the building, the city’s estimate of the fine has declined to $7.7 million.
Last year, the city pledged to force Bowen to pay interest to make up for the delay if he didn’t build the affordable units.
Martha Calhoon, a spokesperson for the Portland Housing Bureau, confirmed that Bowen’s team has informed bureau officials they don’t plan to make any of the units affordable. The city can’t collect the fee in lieu of affordable units until the condos are completed and sold. Until then, the project is still technically in compliance, Calhoon said.
The Ritz-Carlton had been advertising a summer opening for its hotel and at least some condos, and it appears to be on track, according to city development officials.
Based on meetings with project officials, the city expects to issue a temporary certificate of occupancy for floors one through 18 on May 31, said Ken Ray, spokesperson for the Bureau of Development services. That would include the office space in the lower five floors and the hotel.
The Ritz-Carlton website advises customers that reservations can’t be made for the Portland hotel until July.
The remaining three temporary certificates of occupancy for the condos will be issued in three different phases, the last of them on Sept. 30.
Temporary certificates of occupancy are common in commercial buildings and allow a building to be occupied before all of the finishing touches are complete, Ray said.
As Bowen and the Ritz enter the home stretch, much of the Portland business community is watching closely with fingers crossed.
“We are excited to see the success of this building and it being an important part of Portland’s downtown recovery,” said Tim Harrison, Northwest research director at the JLL commercial real estate brokerage. “There’s a lot riding on it.”
-- Jeff Manning; jmanning@oregonian.com