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The real estate firm that owns Portland’s Commonwealth Building, one of the first glass-box towers ever built, says it has defaulted on its $47.4 million mortgage and may lose the building to foreclosure.
KBS Growth & Income REIT said in a regulatory filing earlier this month that the building is worth less than what remains of the loan because of poor business conditions in Portland.
“Given the depressed office rental rates and the continued social unrest and increased crime in downtown Portland where the property is located, the company does not anticipate any near-term recovery in value,” KBS chief financial officer Jeffrey K. Waldvogel said in a regulatory filing Feb. 16. “The company may relinquish ownership of the property to the lender in a foreclosure transaction.”
KBS’s default comes as Portland continues to hemorrhage tenants, many of whom are moving to suburban office parks like Kruse Woods in Lake Oswego. Downtown’s commercial vacancy rate was 26% at the end of 2022, according to Jones Lang LaSalle, compared with 19.2% in downtown Seattle.
As of September, the Commonwealth Building was only 52% occupied, KBS said in an earlier filing.
KBS, based in Newport Beach, Calif., bought the 14-story Commonwealth Building on Southwest 6th Avenue in June 2016 for $69 million, according to the company’s website. In 2018, a wholly owned KBS subsidiary took a loan of up to $51.4 million on the property from Metropolitan Life Insurance Co., the filing said.
The subsidiary “defaulted on the Commonwealth Building mortgage loan following its failure to pay the amount of the debt outstanding and due to the lender on the February 1, 2023, maturity date,” Waldvogel wrote.
Placed on the National Registry of Historic Places in 1976, the Commonwealth Building is a high-profile victim of Portland’s downtown real estate crisis. It was designed by Pietro Belluschi, the Italian-born architect, and completed in 1948. It is among the first sealed, air-conditioned buildings ever erected, according to KBS.
Originally called the Equitable Building, the structure helped launch Belluschi’s career as a one of the great modern architects. He later became dean of the MIT School of Architecture and Planning and helped design New York’s Pam Am Building, completed in 1963.
“The Commonwealth Building is widely recognized as the country’s first modern skyscraper and the first International Style office building erected in the United States, and has been an inspiration for those that came after,” KBS says on the building’s website.