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How bad is the market for office buildings in downtown Portland?
So bad that it’s big news when someone buys one. Most of the time they change hands only during foreclosure—when they go back to the banks that financed them.
Among the rare bargain hunters is Jeff Passadore, owner of Cambridge Real Estate Services, a firm that manages apartment buildings up and down the West Coast. CRES outgrew its offices in the Pearl District, and, like so many other firms, Passadore could have fled to Lake Oswego, Beaverton or Vancouver. But his 35 headquarter employees were accustomed to commuting to the city center, and Passadore was keen to stay in his hometown.
“I didn’t want to be part of a migration out of Portland,” Passadore says. “You have to believe in our city. It’s not to be abandoned. We will have a better day.”
After months of searching, Passadore bought a three-story, 23,000-square-foot building at 2300 Southwest 1st Avenue, just off Interstate 405, for $3.3 million. It’s made of brown concrete, and from the outside it looks like it could be the motor vehicles department in Bucharest. But the inside is light and bright, and there’s a wraparound roof deck with views of Mt. Hood.
The building has a very Portland pedigree. Financier Jeff Grayson managed $1 billion in pension investments from an office on the third floor until September 2000, when the U.S. Securities and Exchange Commission shut him down for running a Ponzi scheme featuring bribery, exotic hunting trips to Africa and Asia, shady car dealers, and the Miami mob.
When Passadore bought it, the building was mostly vacant and chock full of challenges. Among its amenities is a 50-stall covered parking area that has become a perennial homeless camp, Passadore says, where people stoked fires to stay warm and took all manner of drugs. “It was a needle farm,” he says.
A field between the building and I-405 had turned into another camp. Passadore paid $20,000 for 18 dump-truck loads of boulders to discourage camping.
WW spoke with Passadore about his purchase. The interview has been edited for brevity.
WW: You’re not giving up on Portland, and unfortunately, that’s news.
Jeff Passadore: I bought the building because I think Portland is really in a bad spot, and they made the building so affordable that we couldn’t turn it down. I would not have bought the building if we didn’t plan to occupy it. We weren’t looking for a real estate investment. If we were, it wouldn’t have been in the city of Portland. But we were a Portland office needing space. The building’s conveniently located, has good parking, and the elevator brings people right up. You’re not walking two or three blocks from a parking lot.
You bought more space than you need. Any plans to seek tenants?
My understanding is there’s no market. Based on the price point we paid, we don’t necessarily need a third-party tenant and we wouldn’t be able to find one anyway. I could offer it to you, and you would pay a dollar a foot, and I’d say, you’re wearing out my carpet.
Has Portland, Multnomah County or the state been helpful with some of the issues you’ve encountered as a property owner downtown?
We had a vacant lot that had become a de facto campground. There were fires in the field. We had to put boulders in at our expense. We worked with the [Oregon Department of Transportation], and they gave us permission to do it. They had to cement the boulders at the far edge so that they don’t roll into the freeway. ODOT was very cooperative to work with. The city has been unresponsive. We’ve talked to the city about things like improving the landscape island [on Southwest First Avenue], but they don’t return calls.
To the east, you overlook the Queer Affinity Village. These Safe Rest projects have generated some pretty serious NIMBYism. Any issues?
They’re absolutely dead quiet as a neighbor. People need somewhere to live, and it’s managed in such a way that we don’t expect to have any problems. I would like to see our city have a different solution, but we’re not afraid. It’s not something we feel intimidated by.
You bought the building in June. Any regrets?
I think we’ve overpaid because although the parking is a valuable amenity to me, if the rest of the building is now being valued according to more and more foreclosure activity, then maybe I’m underwater already and I didn’t really realize it. That’s OK. I didn’t buy it to be an investment; I bought it as a place our employees could come and provide the service that we provide. It’s just where we work.