$1 million-plus price tags don't scare away penthouse buyers
Tom Brenneke stands on what used to be the roof of the historic Crane Building on the western edge of the burgeoning Pearl District.
Newly constructed walls outline where two luxury penthouses will soon top the building. The western penthouse is for sale for $1.675 million. The eastern one is offered at $3 million.
'Bargains - they're both bargains,' said Brenneke, president of Guardian Management, a Portland real estate investment and management company that is helping convert the building, at 710 N.W. 14th Ave., into a mixed-use development.
Many Portlanders might be shocked to think that spending $3 million for a sixth-floor condominium is a good deal - even for one that is nearly 3,000 square feet and offers spectacular views of Mount Hood and Mount St. Helens.
But Brenneke insists the price is far below what a similar unit would cost in Seattle, San Francisco - or on the other side of downtown in Portland's growing South Waterfront development district, where one penthouse already is priced at nearly $5 million.
Local developers and real estate agents agree that Brenneke's penthouses should be relatively easy sales. In the past five years alone, more than 20 penthouses priced at more than $1 million each have sold in downtown Portland - many before they were even completed.
In fact, the penthouses are merely the cream of a crop of new and remodeled housing projects changing the face and feel of downtown. Originally dependent on city infrastructure investments and tax breaks, developers now are remodeling existing buildings and erecting new ones to meet a growing demand for downtown living - including dozens of penthouses far fancier and more expensive than anything ever before built in the urban core.
Along the way, local real estate professionals say Portlanders are changing what it means to live in a penthouse. In the past, penthouses were defined as larger, more luxurious units on the top floor of high-rise housing towers.
But Patrick Clark of Realty Trust said buyers now are willing to pay premium prices for such units on lower floors, especially those facing the Willamette River in the South Waterfront.
'For some buyers, the river is a greater draw than the best view,' Clark said.
As a result, according to real estate agent Todd Prendergast, work is just being completed or started on downtown buildings housing around 200 condominiums priced at more than $1 million each. About half of them already are sold, said Prendergast, partner and marketing director with Realty Trust Group.
Prendergast says such buyers always have lived in and around Portland. In the past, they have owned large homes in the West Hills or upscale suburban developments. Now a sizable number of them want to live downtown.
'That's a phenomenally dynamic shift in the Portland real estate market. This is something we haven't seen anytime in the past,' he said.
According to the U.S. Census, the number of people living in the census tract that includes the Pearl District more than doubled during the 1990s, from 1,590 in 1990 to 3,612 in 2000. And the numbers continue to rise.
Custom touches not included
When it comes to spectacular penthouses, it is hard to beat the two-story condominium coming up for sale this fall on the 15th floor of the Elizabeth, 333 N.W. Ninth Ave. According to listing agent Justin Harnish, it originally was purchased as a shell by a Lake Oswego builder who planned to use it as a second home.
The 3,300-square-foot unit includes three bedrooms, three baths, a home theater and 1,400 square feet of terraces with a panoramic view stretching from the Fremont Bridge to the north, past Mount St. Helens and Mount Hood on the east to downtown on the south, then southwest to Council Crest.
Custom touches include unique light fixtures, leather paneling, dark wood trim, electric sunshades and an all-glass-enclosed rain shower against a full wall of windows that face downtown.
The asking price is $3.6 million, fully furnished.
'It won't actually be listed for a few months, but I've already had people call and see it,' said Harnish of Harnish Properties at Realty Trust.
Who is likely to buy such a penthouse? According to Clark, in addition to having money, such people share a number of common characteristics. They frequently plan such purchases years in advance and know exactly what they want. Many pay hundreds of thousands of dollars above the purchase price for upgrades, including specific kitchen appliances and bathroom fixtures.
'They are used to getting what that want,' he said.
Not all penthouse buyers are as wealthy or demanding, however.
Two years ago, Nancy Hogarth paid $599,000 for a one-bedroom, 1,500-square-foot penthouse on the 15th floor of the Henry, 1025 N.W. Couch St. The former Aetna money manager - who describes herself as currently between jobs - had lived in other condominiums around town but never in the heart of the city.
'I visit New York a lot and love it and thought, well, I should see if I really want to live downtown,' Hogarth said, adding that she has never regretted the decision.
'I love it. I live next door to Powell's Books and Whole Foods and have a Viking Range that could cook a hog. What more could I want?'
Gas costs may help fuel trend
Why is the downtown real estate market so hot now? Brenneke, Clark, Prendergast and others say that Portland actually is lagging behind other major American cities, where upscale downtown living has been the norm for many, many years.
'Portland is getting into the game late. It's only been in the past few years that people had a reason to live downtown. Portland is only now beginning to grow up,' said Brenneke, who points to the new restaurants in the Pearl District as examples of the amenities that are drawing people downtown.
Prendergast believes that a number of trends are converging at the same time to stimulate the downtown housing market. The children of baby boomers are now leaving home, leaving their parents free to sell their large suburban homes and downsize to condos, including those downtown.
Skyrocketing gasoline prices are reinforcing the environmental mantra - embraced in Portland - that it makes sense to live near where you work or play. And the instability of the stock market has convinced many investors to put their money into real estate instead.
'People are saying, 'I'd rather live in a downtown penthouse than tie my money up in the stockmarket,' ' said Prendergast, who expects these trends to continue for the foreseeable future.
An option only for the rich?
Some people believe that the city is not doing enough to keep downtown affordable for lower-income and middle-class Portlanders. Rose Ann Clementi, the president of the Downtown Neighborhood Association, worries that if the current housing trend continues, the only people who will be able to afford to live downtown will be the very rich and those in taxpayer-supported housing.
'Many of the people who work downtown can't afford to live there anymore,' Clementi said.
Such concerns have prompted the City Council to suspend a tax break that was available to all new downtown housing projects, regardless of whether they included any affordable housing units. The change already has delayed a condominium tower proposed by the Trammell Crow development company in South Waterfront.
Commissioner Randy Leonard has been an outspoken critic of the city's support of downtown market-rate housing projects, regardless of how high the units are priced.
'When working people can't afford to buy a home, why should we be supporting condos for yuppies?' he asked.
Brenneke believes the change may backfire on the city, however. He does not believe that historic structures like the Crane Building and the downtown Meier and Frank store can be preserved without public support.
According to Brenneke, city ordinances require such buildings to be brought up to current building codes, including earthquake standards, greatly increasing the costs of such projects.
The Crane Building is the first redevelopment Guardian Management has ever attempted. It sat empty for years - even as the Pearl District grew up around it - until Brenneke's company was able to figure out a workable plan to save and reuse it.
Brenneke says the renovation will cost $18 million. When completed, the Crane Building will be a six-story, mixed-use development with retail stores and a restaurant on the ground floor, three stories of rental units and the two penthouses. Guardian Management also will relocate its headquarters from Johns Landing on Southwest Macadam Avenue to the building.
The Crane Building was granted a five-year tax break on two floors of apartments that will rent below market rates. When the tax break expires, Brenneke's company will convert the apartments to condominiums and sell them.
'Without the tax break, we would not be able to offer them to renters at all. I'm not sure anyone will build new rental units without some kind of city subsidy,' Brenneke said.