Apartment Building on Sandy Sells for Bargain Price

You may not believe it when you look at your rent bill, but the Portland apartment market is in the dumps, at least for developers. Lots of new buildings went up just as migration to Stumptown went down.

Total occupancy in Portland-area multifamily buildings fell for a seventh consecutive quarter in the first three months of this year, as new supply outstripped demand, according to the real estate firm Colliers.

The slump appears to have come at a bad time for VWR Development, the company that controls this week’s vacant property in Sellwood through a limited liability company (see: Thrashed Building in Sellwood Languishes Amid Thriving Markets, Restaurants).

According to its website, VWR also developed Sandy 51, a 91-unit apartment building on Northeast Sandy Boulevard at 51st Avenue (hence the name). The angular, six-story complex looks a little out of place next to the old Firestone tire store and down the street from Clyde’s Prime Rib.

City records show that Sandy 51 sold last month for $14.4 million to an entity called StandishII House LLC, which, in turn, is controlled by Thuja Apartments LLC in Seattle.

Thuja appears to have gotten a deal. Dividing the price by the number of units shows that Thuja paid just under $160,000 per unit. By comparison, the Beverly, an apartment building just down Sandy, sold earlier this year for $300,000 per unit, according to Colliers. And erecting the building today would cost about $350,000 per unit, according to Colliers analyst Jamison Shields, or around $32 million.

VWR didn’t return two messages left with a receptionist.

To be sure, the units in Sandy 51, now renamed Rose City Flats, are small. Twenty-eight of the 91 units are studios, 54 are one-bedrooms, and the rest are two bedrooms. But an apartment is an apartment, and as of 2022, new affordable housing in Portland cost about $490,000 per unit, with an average subsidy of $150,000, according to Portland Housing Bureau figures.

The bargain price for Sandy 51 begs the question of whether the city or Multnomah County should bid on existing buildings instead of developing new ones. The Housing Bureau allocated $14.4 million to a 94-unit development called Albina One that broke ground last summer. The apartments are larger in Albina One (it includes 2- and 3-bedroom units), but the total cost is much higher, too: $68.8 million, or $732,000 per unit.

Adam Smith, senior broker at HFO, says he knows of half a dozen apartment buildings that are on the market and could be purchased at around $125,000 per unit.

“I can show you how to house 1,000 people very quickly,” Smith says.

Spokesman Gabriel Mathews says the Housing Bureau is sniffing around. “PHB views the current market conditions leading to low whole-building acquisition costs as a ‘once-in-a-market-cycle’ opportunity, and we are actively exploring an acquisition strategy,” Mathews wrote in an email.

The problem is money, he said. Housing bonds sold by Portland and Metro, the regional government, are fully committed, and special tax districts are expiring. Nor can area governments use $450 million in unspent money from Metro’s supportive housing services tax to buy buildings. Metro is mulling a ballot measure to change that.

Could be a good move in what appears to be a buyers’ market.