Gerding Edlen Still Has Incentive, Risk in Brewery Block #2

PORTLAND-Gerding Edlen may have yet to sign an office tenant for the 215,000-sf office and retail building rising on Block #2 of its five-block redevelopment here, but it’s likely not for lack of trying, despite the fact the firm no longer owns the building.

As a sort of financing instrument, Gerding Edlen sold the project earlier this year to Multi Employer Property Trust, a $3 billion fund created by Seattle-based real estate investment advisor Kennedy Associates Real Estate Counsel in 1982. Rich Hass, Kennedy’s senior vice president of acquisitions, says he’s delighted to have acquired the one building that incorporates the old Blitz Brewhouse and is not at all concerned that Block 2, slated for completion in May 2002, is the only Brewery Blocks office project that is under construction and without a signed office tenant.

“We bought the property from them and then hired them to develop, lease and manage the building,” says Hass. “We are aware of the potential conflict in terms of them developing other property within the project and have addressed that (in the agreement); it’s fair to say they have incentives and risks in the deal.”

In further explaining his lack of concern, Hass says Block 2 is better suited toward smaller tenants, which is why the 260,000-sf Block 4 already has secured a 70,000-sf tenant and a 52,000-sf tenant despite the fact that it won’t be completed until several months after Block 2. “The buildings have different floor plates and will appeal to different users,” says Hass. “Our floor plates (17,000 sf) are geared toward tenants that make up the majority of the Portland market; so there’s no issue between us and the developer, they are doing a good job in terms of prospects.”

Indeed, Gerding Edlen’s director of leasing Scott Eaton says “we have three tenants interested in taking two floors, another tenant close to taking 20,000 sf. Despite the design for small tenants, Eaton says he also has received preliminary interest from 80,000-sf to 90,000-sf user.

That user could be Schwabe Williamson and Wyatt, a law firm in the midst of deciding whether to move to a new building or expand and renew its lease in Pacwest Center. Its Pacwest lease, however, doesn’t expire until July 2004, more than two years after Block 2 is slated for completion.

“We’re not doing poorly, it just hasn’t matched up yet,” Eaton tells GlobeSt.com. “The lease expirations of the big tenants (already signed up) are pretty far out there, such that the Block 4 project matched up better. We’ll do well once we can walk tenants through the building; it’s really an efficient layout.”