Kennedy Wilson Auction Group Featured in THE OREGONIAN

Newspaper Story: Our client, Kennedy Wilson Auction Group was featured in a  story about an upcoming Auction in Portland, Oregon.

South Waterfont’s John Ross condo tower to hit auction block

By Ryan Frank, The Oregonian

March 11, 2010

In 2005, the builders of the John Ross tower captured Portland’s condo craze when would-be buyers reserved 80 percent of the building’s units in six days.

Five years, one recession and dozens of cancelled sales later, the tower is headed for the auction block.

The lender that controls the John Ross — named for a British naval officer who explored the unsettled Northwest — will try to unload 50 condos in a few, fast-paced hours on April 11.

The minimum bids, on average, will be 47 percent below the current list prices and 70 percent below the highest listed prices, said Patrick Clark, a Portland real estate broker working on the sales.

The price cuts reflect the new reality for Portland’s downtown condo market.

Last fall, the lender who controls the Atwater Place — a high-end project across from the John Ross — auctioned 40 condos at about 36 percent off the original list prices.

The auction’s low minimum bids and advertising blitz are aimed at attracting fresh interest in the John Ross. The sell off, if it works, would also eventually cut the expense of taxes and insurance costs for the lender currently stuck with the bill.

The lenders also hopes the timing will help bidders cash in on an $8,000 federal tax credit set to expire April 30.

“We’re hoping to capture everybody who’s in the market over the next 30 days,” said Rhett Winchell, president of Kennedy Wilson Auction Group, the Beverly Hills, Calif., company running the auction.

The auction comes after a dramatic rise and fall for the futuristic 31-story John Ross tower.

Sales at the building opened at the height of the condo bubble. At the time, buyers were climbing over each other to own a piece of the budding South Waterfront district.

The City of Portland had pledged millions of taxpayer dollars for roads, streetcars and the aerial tram to turn the largely vacant industrial district into a high-rise neighborhood. As part of that deal, Portland developers Mark Edlen and Homer Williams agreed to build hundreds of new condos in the area.

They sold out the first project, a pair of towers at the Meriwether and quickly started work on their second project across the street — the 303-unit John Ross.

With just an e-mail alert in July 2005, brokers at Realty Trust City attracted about 225 potential buyers willing to put down deposits within just six days.

“This level of sales is unprecedented in Portland, and very rare anywhere in the United States,” Clark of Realty Trust City said at the time. “In the past, it has taken other projects months if not years to reach the same level of sales.”

But by the time the John Ross was completed in 2007, the world had changed.

Banks began tightening lending standards, making it harder for buyers to get mortgages. Investors that helped drive demand withdrew. About 77  of those 225 would-be sales fell apart. And soon, the condo market was flooded with competition.

Edlen and Williams built two more condo towers in South Waterfront, Atwater Place and the 3720 building, and hundreds of more units entered the market.

By August 2009, Edlen and Williams lost primary control of both the John Ross and Atwater Place as the lenders took over the struggling sales efforts.

Block 35 Investors LLC, the company that owns the John Ross, is now controlled by lender Prudential Real Estate Investors, an arm of the Prudential life insurance company.

The John Ross has actually seen a sales burst since last fall.

It had just five closed sales in 2009 before the Atwater auction was announced in early August. Since the auction, the John Ross has recorded 36 sales. But those sales came at a 10 percent discount, according to figures Clark supplied.

Clark said the John Ross’ owner decided to go with an auction because “they want to make sure the project is on a pathway to sell out in 2010.”

As of Wednesday, 223 condos had sold in the 303-unit building. Two more sales are pending, Clark said.

By the April 11 auction, Clark said he hopes the John Ross can qualify for a key endorsement from the Federal Housing Administration.

Condo buyers can’t qualify for an FHA loan — which carries a tiny down payment — if the tower isn’t approved by the federal agency. To qualify, condo buildings must be 70 percent sold out and the John Ross now meets that standard, Clark said.

FHA loans have been especially popular among first-time buyers who have powered the housing market for the last year. In 2009, FHA loans accounted for 37 percent of all mortgages, according to trade publication Inside Mortgage Finance.

Ryan Frank: 503-221-8519.