Old brick buildings may not hold up to city’s seismic upgrade program
Portland’s 1,731 unreinforced masonry buildings may be coming down in the foreseeable future. The culprit probably won’t be the dreaded magnitude 9.0 earthquake but rather a seismic retrofit program designed to prepare for it.
No neighborhood has more of these old brick buildings than the Northwest District, and Old Town Chinatown is not far behind. Their 254 URM buildings give these areas much of their architectural character and charm. For now, at least.
Proposed mandates on building owners are expected to go to the City Council by the end of March.
Cost predictions for compliance range from substantial to staggering, and many close to the issue predict that owners will be driven to sell at discounted prices to developers, who will find it far more profitable to replace rather than save the buildings.
“Building owners who rely on their buildings for their income and retirement are going to lose that livelihood,” said Steve Rose.
As CEO of Bristol Equities, a company at 2078 NW Everett St. that owns 37 apartment buildings, Rose doesn’t put himself in that category. But he has talked to many people who own a single building, the typical pattern among Portland’s URM properties, and their situations are bleak.
That’s also how it looks to Tom Carrollo, general manager of Beardsley Building Development, a developer focusing on historic downtown buildings. Carrollo served on the city’s Unreinforced Masonry Policy Committee, which recommended an array of costly seismic upgrade measures that all sides agree will exceed the ability of many private and public building owners to underwrite.
The plan calls for waivers of building permit fees, business license and property tax exemptions, a revolving loan fund and other aid programs, but they exempt many buildings and are not yet funded and at best wouldn’t approach the 75 percent level of public assistance that some on the committee made a prerequisite for their support.
Carrollo said the burden of the URM mandate will fall heaviest on those least able to pay: owners of single buildings who will have to find engineers and contractors—who may soon have more work than they can handle—while chasing lenders who may have no interest in properties driven underwater in part by the liability created by the mandate itself.
“It’s going to be very difficult for these individual URM building owners,” Carrollo said, noting that one such owner told him he couldn’t even get a seismic contractor to return a phone call requesting an estimate.
Individuals owning historic buildings “will be the least able to handle this requirement,” he said.
The Portland Bureau of Emergency Management, which is running the seismic upgrade project, found that 567 of URM buildings are recognized landmarks or are in historic districts.
Larger companies such as Beardsley, he said, have their own engineers, architects and construction crews, and can better handle tougher requirements. But individuals will be susceptible to conflicting advice, inflated prices and an inability to know whom they can trust.
“The city will have their way with them,” he said of the small owners.
In that there is no state or local certification of seismic contractors, any contractor can claim to be qualified for such work.
“Wealthy folks will get these buildings,” said Ben Kaiser, who heads the development firm Kaiser Group Inc.
At the same time, many of the 7,000-plus lower-cost apartments in URM buildings could be lost.
“We’re losing affordability on our watch,” said Kaiser, who testified before the committee several times.
This bleak picture came into focus last year to Pippa Arend. Arend owns the Weist Apartments at 209 NW 23rd Ave., an elegant Colonial Revival building erected in 1905 and listed on the National Register of Historic Places. Arend bought it in 1995 and has lived in each of its 12 units at various times during an ongoing restoration process.
“I want to stay here until I die,” she said.
Her long-range plans, however, have been thrown off- kilter by the looming mandate, which may consume more money than she has or can borrow.
Hard estimates on retrofit costs and financing options are elusive until details are spelled out in an ordinance, and because each building has unique conditions, general cost ranges are all over the map.
The PBEM report estimated a cost of $51-$69 a square foot to retrofit most commercial URMs. However, the bureau has an estimate prepared by SRM Studio for the Glade Hotel for $141 a square foot.
Walter McMonies, who served on the Policy Committee, said he spent $1.3 million retrofitting the Trinity Place Apartments, a project he called “an extreme bargain” and about half as much as typical buildings of its size and type will cost.
As things appear to her now, Arend’s best hope may be operating the building for 10 or 15 years, when penalties for noncompliance would catch up with her, resulting in loss of a city occupancy permit. She would then have to sell for the value of the land to a developer likely to raze it and erect a high-rise.
Until former City Commissioner Steve Novick proposed the seismic upgrade program in 2014, Arend’s longshot investment in the Weist, which she bought for $1.1 million, appeared to be paying off.
Although she was advised against buying this “money pit,” she was young, had an inheritance and had already “fallen in love” with the building. She kept investing in improvements and its value kept increasing, causing former owner Ron Rubin to remind her from time to time that he wished he hadn’t sold it. The Multnomah County tax assessor set its market value at $6.5 million in 2017.
Still, the property is hardly a cash cow. Arend said it produces about $30,000 in annual operating profits, about half a percent return on equity.
Based on informal conversations with contractors, Arend expects the proposed upgrade requirements could cost $1.5 million-$2 million. A lender advised her she would be unable to get a loan to finance the work.
Rose confirmed her impression about lending prospects.
“A majority of banks will not lend a dime on a URM, period,” he said, a practice adopted after the 2015 New Yorker magazine story about the alarming earthquake threat facing the Pacific Northwest. “When the New Yorker article came out, many lenders totally pulled back, especially on multistory and multifamily buildings.”
The city’s proposed mandate only reinforces the financial market’s assessment that URM buildings have virtually no net value, Rose said.
Arend’s estimate would cover the cost of Option 3 upgrades: Attaching floors to exterior and load-bearing walls is the most costly part of the recommended Option 3, which also involves parapet bracing and ties, crossties and replacement of roofs to install sheathing.
Beyond that, construction could make the building uninhabitable for months, resulting in loss of rent and possible relocation costs for her and her 11 tenants.
Expecting her predicament would influence the policy makers, Arend invited Margaret Mahoney, chair of the URM Policy Committee, to meet in her third-floor apartment. Arend said Mahoney assured her that tenants would only need to vacate for three days and that financing would be available.
Mahoney told the Examiner later that she did not give these or similar assurances
Arend was also directed to cross-check her estimates with Brian Emerick, who heads an architecture and development firm and was a member of the URM Policy Committee, to review her numbers.
Arend said she had no interest in inviting Emerick to inspect her building or do any work.
As a member of the committee, “there is the obvious conflict of interest,” Arend said, and she is certain any estimate Emerick might give would be “lowballed” to protect the viability of the proposed mandate program.
Save Portland Buildings
Arend’s crash course on seismic retrofitting began last spring when she got a mailing from Angie Even, co-owner of a URM commercial building in Woodstock, who leads a loose network of independent building owners. Even attended her first URM meeting in September 2016.
She was disturbed by what she saw.
“I realized, they don’t have the answers,” Even said. “That’s why I got involved, because I knew they didn’t have the answers.”
Even and several other building owners created a website (SavePortlandBuildings.com) on which she posts news from PBEM, counter-information and mobilizing messages. A postcard mailing to about 1,000 URM property owners generated a standing room crowd at the Policy Committee meeting last April, a level of engagement that committee members and those who had served on the preliminary standards and support committees had not seen before. Turnouts of 40-60 people were typical at committee meetings from then until the group made its final recommendation in November.
Emerick downplays the breadth of the opposition and the criticism from the public.
“I understand that there’s a small group of owners who are very vocal,” he told the Examiner, adding, “A lot of engagement didn’t come until the very last minute.”
It may have seemed last minute to Emerick, who also served on a forerunner Standards Committee that convened in 2015, but Even had registered her concerns before the Policy Committee for 14 months.
As for sky-high cost projections, he said some private contractors had assumed requirements based on preliminary figures that were later modified. That was the case, he said, regarding one estimate he reviewed for an apartment building in Southeast Portland.
Still, Emerick is sensitive to the possibility that aggressive mandates could lead to the demolition rather than upgrading of older and historic buildings.
“We’ve got to roll those [mandates] back to match the level of funding we have, or we’ll never get it done,” he said.
He says he does not believe many buildings are actually in jeopardy on this score, “but I know people are afraid of that,” he said.
That fear almost short-circuited the Policy Committee. At its October meeting, a motion to require Option 3 upgrades failed by a 6-5 vote as several members outlined their financial qualms.
At the final meeting in November, committee Chair Mahoney pushed hard for Option 3, finally tipping the balance toward approval, though so many members made their support conditional that staff had to follow up “to ask people what they were supporting,” according to Carrollo of Beardsley Building Development.
Mahoney described the final decision as a consensus, which Carrollo doesn’t dispute, though he thought it fair to say “it was guided toward an outcome.”
“There was no consensus,” said Rose, who was not on the Policy Committee but had served on the earlier Support Committee.
Who speaks for owners?
Mahoney said URM building owners were well represented on the Policy Committee. Nonprofits and government agencies had four seats, and larger private building owners/managers had five.
The small-time building owners, however, had none. Mahoney said McMonies, owner of three URM buildings, represented this sector, but Even disagreed. Because McMonies’ buildings had already been retrofitted, he did not have the same stake in an expensive mandates as owners still facing weighty obligations.
Another stakeholder sector that was left out was the residential and commercial tenants of URM buildings. These tenants would face the most obvious hardship from the retrofit program, forced eviction for a period of perhaps six to 18 months. The committee acknowledged renters only in waiving relocation costs that residential tenants would ordinarily be entitled to for no-cause evictions.
Pearl District Neighborhood Association President Stan Penkin wrote, “City owned low-income housing has one year after a mandate is passed to decide whether it’s ‘feasible.’ No other building [owners] get to do that.
“No special circumstances or hardships were discussed for the 1,415 commercial buildings, [or their tenant] businesses or housing that is not low-income. Should their voices not also be heard?”
Carmen Merlo, who, as PBEM director shepherded the URM seismic upgrade program, has heard the objections but insists, “We did our best to balance risks with economic burden.
“Reasonable costs can be borne by property owners … and we don’t know that the costs will be large.
“I’ve made a commitment that we will not make effective any mandates until we approve tax exemptions [authorized under Senate Bill 311 last year],” she said.
But many small building owners share the view of Jim Wilson, who owns a URM building in North Portland. He calls it a “land grab.”
“The biggest complaint from the developers is that Portland does not have enough lots ready to be developed,” Wilson told the Examiner. “The hysteria and hyperbole of ‘the big one’ play into this perfectly.”