Bank's fine print muddies Pearl District shelter deal
Vanessa Sturgeon's loan for 1435 Northrup does not allow for a long-term lease
Neighbors surprised to learn that the city signed a 12-year lease—not two or three years as Mayor Keith Wilson had claimed—for a proposed homeless shelter at 1435 NW Northrup St. may not be alone.
Officials at Northwest Bank in Lake Oswego, who loaned developer Vanessa Sturgeon $6 million on the property in 2022, agreed to terms that declare immediate default if the borrower leases the property for a period exceeding three years.
This information is detailed in a line of credit agreement obtained through a public records request and filed with Multnomah County.
The clause in question
A “sale or transfer” means the conveyance of Real Property or any right, title or interest therein whether legal or equitable, whether voluntary or involuntary; whether by outright sale, deed, installment sale contract, land contract, contract for deed, leasehold interest with a term greater than three (3) years, lease-option contract, or by assignment, or transfer of an interest in or to any land trust or similar arrangement, or by any other method of conveyance of Real Property interest. … Lender may, at its option, (a) declare immediately due and payable all sums secured by this Deed of Trust or (b) increase the interest rate provided in the Note or other document evidencing the indebtedness…That language leaves little ambiguity: leases longer than three years require the bank’s prior written consent, or the lender can call the entire loan due or impose new terms.
The timing and content of the city’s lease may be relevant here.
Did the bank know?
The city’s lease agreement, signed May 27 between the City of Portland and North Pearl LLC—a company created by Sturgeon for this property—includes one particularly unusual stipulation:
“Tenant shall not record this lease.”
Three local attorneys, two of whom specialize in real estate law, told the NW Examiner they had never encountered such a clause in a public-sector lease.
A quiet deal with public consequences
In whose interest would it be to keep the lease terms out of public records?
Possibly a lender—Northwest Bank, in this case—who might otherwise discover that a borrower has violated their loan conditions.
The Examiner requested comment from Sturgeon via her website. As of publication, we have not received a reply. We will contact the bank directly tomorrow.
This story raises further questions:
Did city officials understand the loan restrictions before signing a 12-year lease?
Why did the city agree to not record the document?
What happens to shelter plans if the property is in default?
Vanessa Sturgeon (from company website)
The city and state decided that relaxing zoning and citizen input rules for shelters would help government respond to the homeless crisis. The case shows the downside of that proposition. Citizen engagement and good process can help avoid policy mistakes.
My work is edited, which slows the path to publication slightly--but it is worth it. Same idea.
Thanks for staying on top of this. The very rushed way in which this whole deal has unfolded stinks, quite frankly. Almost as much as the lack of any public input smells.