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Telco saga coming to end

The now-deflated telecommunications market sent some entrepreneurs packing, although at least one lawsuit from the hot era lingers on.

But not for long.

A Multnomah County Circuit Court judge ruled two weeks ago that DPR Construction Inc., which filed suit in August against the now-defunct F&F Portland Technology Center LLC, had claims to a $2.9 million construction lien. The lien allows DPR to foreclose on the lien and sell the half-finished telco hotel at the former Meier & Frank warehouse at 1438 N.W. Irving St.

It also enables the construction company to pay 10 subcontractors involved in the project, including SERA Architects and Lane-Douglas Construction Inc.

A hearing is scheduled April 17 in Circuit Court to consider the subcontractors' claims for repayment.

'Everyone is vying for who will get paid first when the building is sold in foreclosure,' said Joseph Yazbeck Jr., the Portland attorney representing DPR Construction. 'The subcontractors are worried we are going to get the money and run away with it.'

Of the $2.9 million total, $1.2 million will go to DPR; the rest to subcontractors, he said.

F&F 'has basically lost everything,' said the San Francisco company's attorney Stephen Werts, of Portland. 'There's no reason to continue construction and leasing. They will not be able to recoup that. It's a market-driven problem.'

The eight months of legal wrangling is a lesson in a market gone sour.

Two years ago, the Portland Tech Center was one of a half-dozen telco hotels proposed for vacant warehouses in the Pearl District. At the time, residents weren't too thrilled with the businesses housing telecommunications infrastructure because they lacked architectural character and employees.

The residents' opposition led to an expansion of areas classifed as suitable for mixed-use zoning, extending farther into the Northwest Portland industrial area.

When the telecom market imploded last summer, F&F halted construction on the Tech Center as well as payments to a string of local contractors working on the project. The developer did not insure the project.

DPR, as lead contractor, filed the construction lien and foreclosure papers on the property to protect its losses. The company, which already had been paid $6 million for its work, was not suffering a financial hardship, said David Aaroe, DPR's engineer on the F&F Portland Tech Center project.

Any surplus money from the Tech Center's sale will go to Lehman Brothers Holdings Inc., the private investment firm that provided renovation financing to F&F, he said. Lehman and DPR had earlier gone to court to determine who had first claim on proceeds from a sale, and DPR won.

Attorney Yazbeck predicted that rather than let the Tech Center go into foreclosure, Lehman Bros. will purchase the construction lien so it could sell the building and recoup its losses. F&F purchased the building for $14 million in 1999. Lehman Bros. 'is not going to let this go into foreclosure,' he said.

Todd Collins, a real-estate broker with Macadam Forbes, predicted that the former M&F warehouse would be sold for a loss.

'I don't expect a revival of telco,' he said.

Yazbeck doubts that the building will be completed as a telco hotel, but much of it depends on how strongly the economy and the telecommunications industry rebound.

Contact Kristina Brenneman at This email address is being protected from spambots. You need JavaScript enabled to view it..