HFO Apartment Investor Newsletter | December 2021

Page 1

December 2021


The Light is Shining Bright Again


By Greg Frick, HFO Investment Real Estate At the beginning of 2021, real estate investors were looking for a light at the end of a dark tunnel. The markets were grappling with the uncertainties of the pandemic and how and when an economic recovery would happen. As we sit here in November, dealing with the delta variant of the COVID pandemic, the Portland Area Multifamily Investment market has found that light shining bright again. The pandemic severely damaged retail, hospitality, and office assets throughout the country and the Pacific Northwest. Multifamily and industrial properties continued to be the preferred property type for real estate investors. Multifamily sales volume in the Portland market is on pace to be highest in the number of transactions and dollar volume since 2016. This robust sales market also had values increase across the various apartment classes.




• Employment • Interest Rates • Rents

• Transactions

• Permits • Vacancies

Yes, some investors passed on Portland as a destination for their investment dollars. Some existing investors looked to exit the market because of (continued page 2)

SPONSORED IN PART BY: HFO (503) 241.5541 241.5541 •• www.hfore.com www.hfore.com HFO Investment Investment Real Real Estate Estate LLC LLC •• 2424 2424 SE SE 11th 11th Ave Ave •• Portland, Portland, OR OR 97214 97214 •• (503)

December 2021 INDEX

1. The Light is Shining Bright Again 2. The Collapse of Portland’s Suburban Housing Production 4. Real Market Values and the Pandemic 5. Submarket Vacancy Rates and Concessions 6. A Recap of 2021 and a Look Ahead 10. Regional Market Round-Ups 14. Federal Bills related to Housing in 2021 17. The Impact of COVID-19 on the Clark County economy 18. Jennifer Lyke Joins the HFO Team 19. Economic, Demographic, and Rental Apartment Market Trends 23. Washington State’s Multi-Family Housing Update 25. 2021 Tax Update

THE LIGHT IS SHINING BRIGHT AGAIN (CONTINUED FROM PAGE 1) multiple factors; Portland being in the national spotlight for various protests, political uncertainty, and the current regulations and taxes on housing providers (see Tax Update page 25). Yet the amount of capital looking for multifamily investment in the Portland market far exceeded estimates and more than made up for the capital passing on or leaving Portland. Because of this imbalance, existing owners can command favorable pricing and terms in the disposition of their multifamily assets. Favorable demographic and economic trends are factors driving investor demand in the Portland market. Low interest rates continue to drive interest in commercial real estate investing. With the retail and office markets in flux, institutional investors’ allocation for multifamily investments continues to grow. There is also a spill-over of investor demand to the tertiary markets outside of the Portland PMSA. The hunt for yield continues to drive acquisitions to smaller markets. This increased investor demand in the outlying areas has pushed pricing to levels not seen before—and cap rates to historic lows. The past 18 months have been challenging for many, and the lights sometimes dimmed on the multifamily investment market. However, in 2021 the lights shine bright even as we all try to work through the pandemic. Greg Frick – Greg is co-founder of HFO Real Estate Investment based in Portland, Oregon, and brings more than 30 years of multifamily investment sales and advisory experience.

26. Working with J.R. Johnson for Restoration and Repair Work 27. Oregon Economic Update: The Future is Bright 29. Oregon’s Delays on Distributing Rent Relief Funds Unites Landlords and Tenants in Frustration

The Collapse of Portland’s Suburban Housing Production

31. The latest in the Battle to Preserve 1031 Exchanges

By Gerard C.S. Mildner, Academic Director, PSU Center for Real Estate

32. CRE Financing Trends in Q4 2021

As downtown apartment rents declined during the pandemic, rents and prices in the suburbs have risen, particularly for single-family homes with an office and a backyard for children. Using the Case-Shiller index, Portland-area home prices have risen 10.6% in the past year and over 100% in the last decade.

23. Not all Condition Assessments are Created Equal

Prices in Portland now rival the most expensive housing in the country. In the last 20 years, Portland has been the 6th fastest appreciating market of the 20 metros in the index, along with Los Angeles, San Diego, San Francisco, Seattle, Miami, and Washington, DC. (continued next page) 2 HFO INVESTMENT REAL ESTATE • (503) 241.5541 • WWW.HFORE.COM

These seven markets all suffer from housing production barriers, whether exclusionary single-family zoning in California or regional land use controls in Oregon or Maryland. Comparing 1990-2007 and 2011-2019 (i.e., ignoring the Great Recession), annual housing production in Clackamas County fell by 32% and in Washington County by 40%. River Terrace in Tigard is booming, but we don’t have projects in the pipeline to replicate the success of Villebois, Bethany, Forest Heights, Cooper Mountain, and other noteworthy suburban communities. Since 1980, the population of our three-county region has increased by 74%, while the urban growth boundary has been expanded by only 15%. Beyond the UGB, land prices fall by a factor of 80 to 90%, suggesting that our allocation of that land for grass seeds, strawberries, and hazelnuts rather than housing is a misallocation of resources. Our regional government, Metro, justifies this starvation land diet by measuring housing capacity via the theoretical level of housing production allowed by zoning rather than the likely development outcome determined by the cost of construction and consumer demand. Metro’s “Region 2040 Plan” assumed we would build high-density construction in town centers from Gateway

to Oregon City to Hillsboro. Yet rents and prices in those markets cannot possibly justify that intensity of development. In rough terms, building at the density of five-story wood construction over a concrete platform, as is typical of Portland, costs 50% more per square foot than garden apartments built with two-story wood construction. Building beyond five stories requires steel and concrete construction that costs an additional 50% more per square foot. In 2015, Metro’s land use planners simply assumed that rents and prices in the region would rise to San Francisco and Los Angeles levels to justify their no-growth conclusion. However, that result was buried deep in the report’s appendix. The Metro Council agreed to expand the urban growth boundary in 2019 by 0.8% in four suburban towns. Yet, the Council provided little assistance to jurisdictions and land developers to make those UGB expansions develop quickly. For example, no project in Metro’s failed November 2020 transportation bond served the needs of the new UGB expansion areas. Moreover, since housing markets don’t stop at a city’s edge, those jurisdictions are unlikely to provide infrastructure support to satisfy the region’s housing needs.

PORTLAND METROPOLITAN AREA HOUSING PERMITS BY COUNTY Total 1990-2007 2008-2010 2011-2020 pre/post recession Multi-Family 1990-2007 2008-2010 2011-2020 Single-Family 1990-2007 2008-2010 2011-2020

































































5,587 (continued page 5)


Real Market Values and the Pandemic By Chris and Alex Robinson, CKR Law Group, P.C. The 2021 property tax statements will be mailed shortly. Many have asked if there is an opportunity for a property tax appeal, based on the pandemic, for seasoned properties—that may be a tricky proposition. That said, apartment owners have faced many challenges as a result of the pandemic. For example, owners dealt with eviction moratoriums, and some tenants took advantage of that mandate. The owners that connected with our office reported, for the most part, relatively stable rent collections.

there evidence that cap rates have increased due to the pandemic—or market conditions in general?

Multifamily projects completed in 2020 and thoroughly assessed for the 2021 tax year deserve closer scrutiny. That is because 2021 will be an “exception” year where the market value and taxable value will be set. For those properties, the question will be whether any impairment is temporary or more long-lasting. Pandemic or no pandemic, these properties must be carefully reviewed to ascertain whether an appeal is warranted.


In the past, county assessors have not considered lease-up or absorption in the valuation of the property as complete. Instead, the assessor assumes stabilized occupancy, regardless of where the property is in leaseup. The justification for this is Measure 50. The county’s position is that the tax initiative does not allow the county to return in a subsequent tax year and reset the market value and taxable value based on stabilization.

Our office gets frequent complaints from apartment owners and property managers regarding the tax burden on competitive projects, which is significantly lower than the projects they own or manage. They want to know if that can be a basis of an appeal. Unfortunately, the answer is no. Measure 50 eliminated any requirement of uniformity or equalization.


1. Sale or recent appraisal of the property below the roll value 2. Discovery of significant capital needs for repairs or replacements 3. Related to #2; discovery of construction defects requiring high cost to cure

There are many inequities in Measure 50. Some cut in the county’s favor and some in favor of the taxpayer.

4. Significant increase in vacancy accompanied with a decline in net operating income

If you have market data that shows that investors discount the market value because the property was not stabilized at acquisition, please send it our way. For example, is

The deadline for appeal remains December 31st. There is no provision for late filing as a result of the pandemic.


If you believe your property is a candidate for an appeal, we can provide a complimentary review. Our engagements for appeals are based on a contingency fee. We would need 2019 and 2020 income and expenses and a 2021 YTD report along with a December 2020 rent roll and most current rent roll. Lastly, it is helpful if you provide a copy of the 2021 property tax statement. The sooner we are engaged and have the information for review, the better. Chris Robinson can be reached by email at chris@ckrlawgroup.com or by phone at (503) 635-9330.


Submarket Vacancy Rates and Concessions for Greater Portland, the Valley & Bend According to Multifamily NW’s latest survey of nearly 65,000 units, the Portland Metro fall 2021 vacancy rate of 3.36% is down 1.68% from a year ago. Vacancy Rates – Portland/Vancouver Metro

Current vacancy rates are highest in areas with new construction including Northwest Portland (6.1%), North Portland/St Johns (5.45%), Downtown Portland (4.63%), SW Portland (4.46%), and Outer NE (4.1%). Among the lowest are those in suburban areas like Lake Oswego/West Linn (1.63%), and Tigard/Tualatin/Sherwood (1.72%). This trend represents flip from last year’s numbers with low vacancies in the suburbs.

Rent Rates – Portland/Vancouver Metro


In the Portland metro area concessions range from 35.7% (Downtown Portland) to 25% in NW Portland to 0% in Oregon City/Gladstone, Clackamas, and Outer SE Portland. Concessions of 3.8% to 13.6% are being offered in East and West Vancouver, Wilsonville/ Canby, Lake Oswego, Aloha, Beaverton, Tigard/Tualatin, Wilsonville/Canby, Milwaukie, Inner & Central SE Portland with areas outside close-in Portland generally offering fewer incentives.

Rent rates in the Portland MSA have increased by 5.68% overall but at significantly variable amounts ranging from a decrease of 2.94% in NW Portland to a high of 13.82% in Milwaukie.

Valley Update

Other submarkets demonstrating significant overall rate increases in the past year are East Vancouver (11.72%) West Vancouver (10.49%), Inner & Central SE Portland (7.92%), Clackamas (6.71%), and Oregon City/ Gladstone (6.7%).

Rents in the Salem area have increased approximately 2.2%, and in Eugene/Springfield 11.72% while BendRedmond reports a whopping 30.82% increase (there were 948 units surveyed in the Bend/Redmond market).

In the Willamette Valley, Salem and Eugene/Springfield both have vacancy rates of about 2.2%, and Bend/ Redmond has a rate of 1.3%.

For an additional breakdown of the numbers, see Jerry Johnson’s article pages 19-22.

THE COLLAPSE OF PORTLAND’S SUBURBAN HOUSING PRODUCTION (CONTINUED FROM PAGE 3) On paper, our region and state outline a successful land-use system where we make long-term plans, build infrastructure, allow for high-density construction, limit the power of NIMBY complaints, and require suburbs to allow multi-family construction.

The demand for single-family housing is likely to continue as workers will seek the option to work at home for several days per month. To make that a reality, we need to remove the development barriers that we have created.

However, those pro-housing reforms have been swamped by new social burdens on large-scale housing development, putting small builders out of business and scaring off national investors. The continued discussion about rent control, eviction moratoriums, and downtown violence only compounds the problem.

Gerard C.S. Mildner is an Associate Professor of Real Estate Finance at Portland State University. He can be reached by email at mildnerg@pdx.edu or by phone at (503) 725-5175.


A Recap of 2021 and a Look Ahead at 2022 By Michael Pierce, HFO Investment Real Estate Research Analyst and Aaron Kirk Douglas, HFO Marketing Director With limited new units coming online in 2021 in the Portland/Vancouver metro area, year-over-year market rents are up 5.7% year-over year according to Multifamily NW survey data. Most submarkets saw rents increase. Vacancies now average approximately 3.36% due to limited availability of new units. It has been a rough year of residential eviction and foreclosure moratoriums in Oregon, Washington, and at the national level. Although the federal government disbursed millions to states to support landlords and tenants for lost rents, many states have not passed the funds along quickly enough (see story page 29). Despite requirements for residents to make payment arrangements for unpaid rent by February 2022, uncertainty over resolution of outstanding rent remains.

Just as in 2020, some investors have removed equity from the Pacific Northwest market due to these developments while others have sought to take advantage of historically low interest rates through new investments and refinancing. Oregon’s ongoing deficit of affordable housing units, business expansion in some sectors, and an anticipated influx of climate refugees from areas facing drought and


2021: 3.36% (Fall)

8.0% 6.0%




2020: 5.04%


2019: 4.42% 3.36%


2018: 4.40% 2017: 4.37%

2.0% 0%

Source: Multifamily NW Apartment Report

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019


2021 (Fall)

RENTS / SQFT $2.40 $2.20 $2.00 $1.80






2020: $1.76 2019: $1.74 2018: $1.62


2017: $1.57


2008: $0.86

$1.20 $0.86 $1.00 $0.80

2021: $1.86 (Fall)

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Source: Multifamily NW Apartment Report


2021 (Fall)

(continued next page) 6 HFO INVESTMENT REAL ESTATE • (503) 241.5541 • WWW.HFORE.COM

wildfires, all add to the expectation that the Pacific Northwest’s housing market will remain strong well into the future.

Market Vacancy and Rents

In 2020, the Portland MSA market experienced some increasing vacancies through the fall of 2020 as renters doubled-up due to the pandemic and subsequent loss of employment and delivery of new units. With the quick rebound in the job market in 2021, those trends reversed.

HFO Sale: The Russell

Institutional Transactions ($10 million and up)


$3.0 $2.5 $2.0 Billions

In 2020, there were 64 apartment transactions priced over $10 million in the Portland metro area. Through the end of September 2021, there were 96 apartment transactions priced over $10 million. This represents an increase of 50% over 2020, with several months left in 2021. If the trends hold, 2021 would exceed 2016’s record $2.57 billion in institutional sales.

68 Units in Portland, OR

$1.5 $1.0 $0.5

$10 Million and up transactions this year include:


• The Russell; 68 units in Portland sold for $19.7 million




Under $10 Million




$10 Million Plus








Source: CoStar Multi-Family 10+ Units – Portland MSA

• River Run Village; 84 units in Gladstone sold for $14.85 million • East of Eleven; 84 units in Portland sold for $22.3 million


180 160

Non-Institutional Transactions (under $10 million)

120 Transactions

Turning to Portland metro non institutional transactions below $10 million, we have seen 115 transactions through the end of the third quarter, accounting for over $373 million in dollar volume. If this trend holds, 2021 will be will be greater than the 122 transactions and $396M seen in 2020.

140 100 80 60 40 20 0



Under $10 Million





$10 Million Plus








Source: CoStar Multi-Family 10+ Units – Portland MSA



Portland Metro Area permits for 5+ units have risen steadily from a low of 794 units authorized in 2009 and a high of 9,979 in 2017 (the year Portland’s inclusionary housing law took effect) to 5,423 in 2020 and 6,024 projected for 2021 based on 5,423 applications through August. Still, experts say, housing has not accelerated enough to meet the estimated regional demand of tens of thousands of new units. (Note: permits don’t always translate to completions, as indicated in Jerry Johnson’s article pages 19-22.)

MULTI-FAMILY PERMITS ISSUED PORTLAND METRO AREA 5+ UNITS 12,000 10,000 8,000 6,000 4,000 2,000 0

As we have said many times, it does not make sense for elected leaders to expect the private sector to subsidize housing costs to those in need while simultaneously making it more expensive to build and operate them. We firmly believe our state’s housing issues can best be solved by encouraging development rather than constricting it. Despite a six-year self-declared housing emergency, our elected officials have yet to work with all stakeholders to develop ideas and solutions addressing our market’s challenges with affordability, rather than implementing regressive policies that look good in the press but have significant real-life consequences for developers and owners. These policies have the opposite impact of the desired outcome and often hurt the very people elected officials are attempting to help. Ultimately those increased fees and costs are passed along to renters. We continue to call for leaders to assemble a roundtable of experts of property owners and developers

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021


Source: U.S. Census Bureau 5+ Units through September, 2021


CITY OF PORTLAND DEVELOPMENT PIPELINE (AS OF 10/1/2021) 11,000 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0



Submitted 6 Months Pre-IZ Enactment

Post IZ Rental Units in Market Rate Projects (Since Feb. 2017)

Vested Units



IZ Approved Rentals

Completed Private Rentals

(Including 36 condos)


Source: City of Portland Housing Advisory Commission - (HFO Estimate of 2021 based on filings through Q3). The above numbers exclude 2,071 rental housing units funded by the public and only reflect private market-rate rentals.

in both Oregon and Washington to work together on how we implement effective, long-term solutions to the complex housing challenges we face. The status quo of issuing edicts and mandates is doomed to fail. Note: The inclusionary zoning ordinance implemented in February of 2017 (nearly five years ago) has resulted in the approval of zero rental units at 30% Median Family Income (MFI), 714 rental units at 60% MFI and 367 rental units at 80% MFI. (Source: IH Program Permit Progress Summary dated 10/5/2021 City of Portland.)


HFO Sale: Division Street Portfolio 59 Units in Portland, OR

HFO Sale: Bridger Commons

23 Units in Portland, OR

HFO Sale: The Oliver 21 Units in Portland, OR

HFO Sale: Vancouver Portfolio 47 Units in Vancouver, WA


Regional Round-Up WASHINGTON Tacoma / Pierce County Population Growth Population City: 219,346 (up 10.6% since 2010) County: 921,130 (up 15.8% since 2010)

Multifamily Permits Seattle-Tacoma MSA 2021: 12,474 (Aug. YTD) 2020: 13,436 2019: 16,426 2018: 17,450

Vacancy Rates* Pierce County 2021: 3.1% (Q3) 2020: 4.0% 2019: 5.1%

Unemployment Rate Tacoma Area 2021: 5.0% (August) 2020: 10.1% 2019: 5.6% 2018: 4.9%

*Source: CoStar

Tacoma (pop. 219,346) is currently the third-largest city in the state. Its growth rate is exceeding that of Spokane (pop. 228,989). If current trends continue, it could become Washington’s second-largest city.

Multifamily Construction

The U.S. Census reported that, at the end of 2020, the median rent in Tacoma was over $1,100 for the first time in the city’s history. Rent per square foot has been steadily climbing in the city over the past few years. According to CoStar, rent as of August 2021 was $1.77 per square foot – up from $1.61 a year earlier.


In October 2021, Tacoma was the fastest growing metropolitan areas in the Puget Sound at 18.9%, according to Apartment List. The area’s zip code has seen several new museums, hotels, and waterfront improvement projects, along with population increases—resulting in a 168% increase in home values over nine years.

Spokane / Spokane County Rental Rates Population City: 228,081 (up 9.2% since 2010) County: 529,339 (up 14.5% since 2010)

Multifamily Permits Spokane MSA 2021: 990 (Aug. YTD) 2020: 1,297 2019: 1,181

Vacancy Rates* Spokane County 2021: 3.66% (Q3) 2020: 4.14% 2019: 4.08%

Unemployment Rate Spokane County (Sept. Benchmarks) 2021: 5.0% (August) 2020: 9.3% 2019: 4.9%

*Source: CoStar

As of August 20, the average rent in Spokane is $1,098— up from $784 in 2016.

Job Market

Spokane has seen steady job growth over the past several years. The largest employers are The State of Washington, Spokane Public Schools, Providence Hospital, and Fairchild Air Force Base. Spokane County is the fifth-largest aerospace cluster in the United States—home to 120 manufacturers, suppliers, and distributors.




Olympia / Thurston County Renter Population Population City: 55,065 (Up 18.5% since 2010) County: 294,793 (Up 16.9% since 2010)

Multifamily Permits Olympia-Lacey-Tumwater MSA 2021: 409 (Aug. YTD) 2020: 379 2019: 846 2018: 726

Vacancy Rates* 2021: 2.7% (Q3) 2020: 5.0% 2019: 5.5% 2018: 3.8%

Unemployment Rate (Q3) Thurston County 2021: 4.5% (August) 2020: 8.3% 2019: 4.8% 2018: 4.1%

*Source: CoStar

53% of households in Olympia are renteroccupied, and 43.6% of residents have a bachelor’s degree or higher.


Due to Olympia’s status as Washington’s state capital, roughly a quarter of all jobs in Olympia are in Public Administration. The largest private employers in Thurston County are Providence Saint Peter Hospital, Walmart, Safeway, South Puget Sound Community College, and Xerox.

Multifamily Construction

According to CoStar, between 2011 and 2020, over 3,100 units opened in the Olympia-Tumwater Metro Area, with a confirmed 582 units currently under construction as of October 2021. The vacancy rate in the City of Olympia was 4.5% as of the third quarter of 2021.

Tri-Cities / Benton & Franklin Counties Population Growth Population MSA: 299,612 (Up 17.2% since 2010)

Multifamily Permits Kennewick-Richland MSA 2021: 142 (Aug. YTD) 2020: 190 2019: 339

Vacancy Rates* Benton | Franklin County 2021: 3.0% (Q3) 2020: 2.6% 2019: 5.2%

Unemployment Rate (Q3) Kennewick-Richland-Pasco Area 2021: 5.4% (August) 2020: 8.5% 2019: 4.7%

The Tri-Cities area population has grown by 57.3% since the year 2000.

Employment Growth

The Tri-Cities area includes significant employers in the scientific community, including Battelle/ Pacific Northwest National Laboratory, CH2M, along with large utilities, medical centers, school districts, and food processors. According to the Tri-City Development Council, 76% of the metro area population has a high school, college, or graduate degree, and there are more scientists and engineers per capita in the area than anywhere else in the nation. According to ZipRecruiter, the average hourly wage in the Tri-Cities is $23.35.

*Source: CoStar




Eugene-Springfield / Lane County Population City of Eugene: 176,654 (Up 13.1% since 2010) City of Springfield: 61,851 (Up 4.1% since 2010) County: 382,067 (Up 8.6% since 2010)

Multifamily Permits Eugene/Springfield 2021: 883 (Aug. YTD) 2020: 401 2019: 304 2018: 492


Lane County’s population grew by 8.9% between 2010 and 2020, while the city of Eugene saw population growth of 13% over the same period. In the city of Eugene, 52.7% of housing units are renter-occupied.


Government, education, healthcare, professional services, and leisure and hospitality sectors make up more than 50% of the MSA’s total workforce. The largest employers in Lane County are PeaceHealth, the University of Oregon, Eugene School District, the US Government, the City of Eugene, and the Lane County government. The Eugene-Springfield Metro Area is also home to an emerging technology sector, known locally as the Silicon Shire. Several local tech companies now boast over 100 employees each in the metro area, including 3Cinteractive, Alacrity Services, Datalogic ADC, Inseego, Presidio, and Symantec. 41.8% of Eugene residents have a bachelor’s degree or higher, and the median household income in Lane County is $52,426.

Vacancy Rates Lane County 2021: 2.2% (Multifamily NW Fall Apartment Report) 2020: 4.03% (Multifamily NW Fall Apartment Report) 2019: 4.0% (Multifamily NW Fall Apartment Report)

Unemployment Rate (Q3) 2021: 5.2% (September) 2020: 7.7% 2019: 4.5% 2018: 4.5%

Housing & Local Politics

According to local organizations, the Neighborhood Economic Development Corp and Cornerstone Community Housing, Eugene had the nation’s second most constrained housing market since 2017. Between August 2012 and August 2021, the average sale price for a home in Lane County increased from $197,000 to $408,000. Despite the need for new housing, the city permitted fewer single-family houses in 2020 than it did in 2019. As of August 2021, 136 permits were issued for multifamily units in the Eugene-Springfield Metro Area. If this pace continues for the rest of the year, just 172 new units will be permitted. Eugene has recently only expanded its urban growth boundary to accommodate parks, schools, and office space. The city has not passed any legislation that would provide additional protection for renters above what is required by state and federal laws, despite a persistent housing shortage. This includes additional protections by the city for evictions related to COVID-19. Under recently passed HB 2001, Eugene is implementing a plan for allowing duplexes and triplexes in singlefamily neighborhoods.




Medford / Jackson County Population City: 85,824 (Up 14.6% since 2010) County: 223,259 (Up 9.9% since 2010)

Multifamily Permits Medford/Jackson County MSA 2021: 106 (Aug. YTD) 2020: 87 2019: 175 2018: 232


Medford’s population grew by 14.4% between 2010 and 2020, while Jackson County’s population grew by 9.9% over the same period. Over 27.8% of Jackson County residents over the age of 25 have a bachelor’s degree or higher, and 51.4% of Medford homes are renter-occupied. The median income in Jackson County is $53,412.


The largest employers in Jackson County are Amy’s Kitchen, Asante Health System, Harry & David, Lithia Motors, Pacific Retirement Services, and Providence Health Systems.

Vacancy Rates (Q3) Medford 2021: 2.28% (Q3 – Costar) 2020: 2.77% 2019: 1.7% 2018: 3.33%

Unemployment Rate Medford Area 2021: 5.0% (September) 2020: 7.9% 2019: 4.7% 2018: 4.9%


Between July 2012 and 2021, the median home price in Jackson County increased by 108%. As the county continues to grow, housing affordability is an increasing problem for residents. Approximately a third of Jackson County residents spend more than 50% of their income on rent. In February 2018, the Medford City Council passed a 0.3% construction excise tax within the city limits—lower than the 1% allowed in Oregon. Medford’s plan gives 15% of the funds generated to a nonprofit for nutrition, housing, and senior programs, 35% on low-income housing projects, and 50% to fund programs that build houses for residents making up to 120% area median income.

HFO Sale: Fountain Villa Apartments

82 Units in Eugene, OR


Federal Bills related to Housing 2021 By Michael Pierce, HFO Research Analyst


• Accelerate and broaden state and local delivery of emergency rental assistance by providing clarity on bulk payments, aiding Americans experiencing homelessness

• ERA1 provides up to $25 billion under the Consolidated Appropriations Act, 2021, which was enacted on December 27, 2020

• Encourage partnerships with courts to actively prevent evictions and develop eviction diversion programs

Emergency Rental Assistance (ERA) - made funding available to assist households unable to pay rent or utilities. Two separate programs have been established:

• ERA2 provides up to $21.55 billion under the American Rescue Plan Act of 2021, enacted on March 11, 2021 HB1651 - Extended existing provisions that provide relief to debtors in bankruptcy, including those related to the COVID-19 (i.e., coronavirus disease 2019) pandemic. These provisions exclude certain COVID-19 aid payments from income for the purposes of bankruptcy. HB1799 - Extended the Paycheck Protection Program, established to support small businesses in response to COVID-19, through June 30, 2021. HB1319 - Provided additional relief to address the continued impact of COVID-19 on the economy, public health, state and local governments, individuals, and businesses.


Within its agencies, the federal government urged its agencies to employ these policies; • Encourage the plan of anti-eviction diversion practices to benefit families, tenants, landlords, and the courts themselves • Effectively prevent unnecessary evictions through the deployment of ERA funds, employing local strategies that encourage alternatives 14 HFO INVESTMENT REAL ESTATE • (503) 241.5541 • WWW.HFORE.COM

• Help families experiencing homelessness gain access to assistance • Drive towards equal access by removing language and cultural barriers in securing emergency rental assistance • Provide a streamlined payment option for utility providers and large landlords to make accessing emergency rental assistance on behalf of multiple tenants easier and more attractive • Push grantee coordination to reduce confusion, burdens, and delays in providing assistance created by differences in locally-imposed requirements among programs operating in the same regions • Lift up grantees implementing effective practices to ensure that assistance quickly reaches the renters who need it most Ensure that the 30-day eviction notice requirement for federally-backed properties is enforced. • HUD/FHA and USDA will ensure that no landlord (public or private) whose underlying financing is backed by the federal government require a tenant to vacate. (e.g., HUD/FHA or USDA), or purchased or securitized by Freddie Mac or Fannie Mae Make clear the Fair Housing Act must be followed. • Evictions disproportionately affect communities of color, people with disabilities, women, and other members of protected classes



Date Introduced

Sponsored By (Party)


Extends existing provisions providing relief to debtors in bankruptcy, including those related to the COVID-19 pandemic.




Reauthorizes the Neighborhood Stabilization Program for FY2021 to provide grants to states, local governments, and nonprofit entities to convert blighted, abandoned, or foreclosed property into affordable housing for low-income families.




Provides additional FY2021 funding for the Department of the Treasury's Emergency Rental Assistance program, which was established in response to the COVID-19 pandemic.




Provides assistance to rural, multifamily rental-housing projects and tenants. Specifically, the Department of Agriculture (USDA) must implement a program for the preservation and revitalization of such housing projects that are financed with USDA loans.




Provides housing assistance during the COVID-19 public health emergency. Specifically, the bill suspends rental and mortgage payments for primary tenants through April 1, 2022. The bill also forgives rental and mortgage debt.




Adds the Rural Development Voucher Program to covered housing programs under the Violence Against Women Act of 1994 (VAWA). Specifically, it extends VAWA's housing protections (e.g., protection from eviction or denial of housing).




Prohibits discrimination against survivors of domestic violence, sexual assault, or sex trafficking in the sale or rental of housing and other related real estate activities.




Revises provisions of the low-income housing tax credit and renames it as the affordable housing credit. The bill increases the per capita dollar amount of the credit, and its minimum ceiling amount beginning in 2021 and extends the inflation adjustment.




Prohibits a landlord, during a national emergency, from (1) evicting a tenant without a court order, (2) creating a hostile environment for a tenant to cause the tenant to vacate, or (3) impairing the habitability of a dwelling.




A bill to make grants to support online training of residential contractors and rebates for the energy efficiency upgrades of homes and multifamily buildings and other purposes.




To authorize the Attorney General to make grants to states and localities to provide the right to counsel in civil actions related to eviction and other purposes.




A bill to require the Secretary of Housing and Urban Development to establish a national evictions database and for other purposes.




To protect and empower residents of certain forms of federally assisted rental housing and for other purposes.




Allows owners of rental buildings who provide reductions in rent to their low-income tenants a refundable tax credit for a specified percentage of the difference between market rent and 30% of the monthly family income of such tenants.






Date Introduced

Sponsored By (Party)


To prohibit a federal official from establishing, extending, maintaining, implementing, or enforcing a moratorium on evictions unless explicitly authorized by federal statute and other purposes.




Expressing that the United States is obligated to permanently end the unhoused crisis by 2025 and uphold, protect, and enforce the civil and human rights of unhoused individuals, including the human rights to housing, universal health care, and livable wages.




To provide for a moratorium on evictions from and foreclosures on residences during a major disaster or emergency and other purposes.




To expedite the application for payment of rental arrearages by landlords and mandate tenant access to financial assistance and other purposes.




A bill to clarify that the Secretary of Health and Human Services has authority to implement a residential eviction moratorium under the quarantine authority vested by the Public Health Service Act and other purposes.




To require the Secretary of Housing and Urban Development to establish a national evictions database and other purposes.



HFO Sale: Fillmore Inn Apartments 204 Units in Corvallis, OR


The impact of COVID-19 on the Clark County economy—and some good news on its recovery. By Scott Bailey, Regional Economist, Washington Employment Security Department

Employment followed the same pattern as elsewhere around the country: a sharp drop in April 2020, a snap-back over the next two months with roughly half of the job loss made up, and a stop-and-go hiring pattern since then. The good news is that Clark County has been recovering at a faster pace than elsewhere. From February 2020 to August 2021, the county lost a net 1,100 jobs—0.6% of its pre-COVID employment. That was less than the nation (-3.5%), the state (-3.1%), Oregon (-4.1%), Seattle Metro (-5.0%), and the Portland metro area (-4.8%). In addition, a dozen industries have returned to or surpassed their pre-COVID levels, led by professional services, which, with lots of opportunities for remote work, gained 1,200 jobs—a 14.1% increase. At the other end of the telescope, accommodations and food services had the largest job loss and have been the slowest to recover. After an initial loss of 4,400 jobs, the industry regained 2,400, for a deficit of 2,000 jobs or -14.5%. Again, most of the decline was concentrated in full-service restaurants. Another sector, arts, entertainment and recreation, sustained higher wage losses, and in August was still 900 jobs (-39.3%) short of its pre-COVID level.

leading to unfilled positions. Some unemployed people are reluctant to return to work due to health concerns; others have been unable to find reliable childcare, including for older children who may at any point be subject to isolation due to exposure to COVID at school. Other workers have had, during COVID, a “great awakening” as to the quality of their job. Factors such as low wages, no or lackluster benefits, mistreatment by managers and/or customers, and lack of control over work schedules have led an untold number to look for work in another field. The third factor has been supply chain disruptions. And while COVID has been the proximate cause of shortages, decades of policies and practices which allowed monopolization to occur at critical points in the chain has encouraged outsourcing. Deregulation of key industries led to fragility throughout the supply system. If you have only one supplier for a key component, and that component is produced overseas in a COVIDimpacted country...

Throughout the pandemic, data has shown that the African American, Indigenous, Latinx, and Pacific Islander populations have been disproportionately affected in terms of COVID infections and economics. Women of color have had sharply higher job losses— white women have been only marginally worse off than white men. The recovery here and elsewhere has been slowed by three factors. First, the low vaccination rate has amplified the number of COVID cases, with noticeable direct and indirect effects on businesses. Second, COVID has had several interesting impacts on the labor supply,


THE IMPACT OF COVID-19 ON THE CLARK COUNTY ECONOMY—AND SOME GOOD NEWS ON ITS RECOVERY (CONTINUED FROM PAGE 17) The immense stimulus packages approved by Congress have helped keep many households and boosted retail sales. For example, in Clark County, taxable sales at retail outlets, which were expanding at about 1.5% each quarter pre-pandemic, have averaged almost 6% growth each quarter during the pandemic. On the other hand, sales at restaurants and hotel/motels have unfortunately seriously declined—the former were 12% lower in the first quarter of 2021 than pre-COVID sales; the latter was down 41%. Housing construction has been robust throughout the pandemic. Through August, permits had been filed for 4,410 housing units—2,572 single-family and 1,838 multi-family. Those are both record highs (going back to 1980)—more in eight months than in most years. The mismatch between housing prices/rents and incomes continued, however, particularly in multi-family. Before COVID hit in 2019, almost half of rental households in the county were classified as cost-burdened and nearly a quarter as severely cost-burdened, with rent taking up over half of the household income. With job losses

concentrated among lower-income households, things can only have gotten worse. Looking ahead: the recovery will likely continue its uneven pace in 2022, with the three impediments above continuing to play a role. First, COVID has been unpredictable, so all bets are off there, but mandates look to increase vaccination rates, which should help keep infection rates lower (knock on wood). Second, supply chain disruptions will continue to hamper growth. Third, the labor market should resolve itself over time. If nothing else, many households have exhausted their savings, others will in the coming months, and holdouts will be forced to find another unfulfilling job (look for an increase in despair). Finally, the most crucial question is: with rental assistance programs not working efficiently, will we see a wave of evictions and an increase in homelessness? Scott Bailey can be reached by email at scott.bailey@ESD. wa.gov or phone at (360) 810-0048.

HFO Adds Director of Operations Jennifer Lyke HFO’s team of multifamily experts now includes Director of Operations Jennifer Lyke. Lyke is well known within the commercial real estate industry for her 25-year-career with Chicago Title as a Vice President and Commercial Escrow Manager. “HFO is very fortunate to have added Jennifer to our team,” said HFO partner Rob Marton. “She is known throughout the industry as a highly organized and results-driven professional and team leader. In addition, she is well known and respected by regional real estate investors for her clientfocused and responsive approach.” During her 25-year career at Chicago Title, Jennifer consistently achieved annual recognition as a top national commercial escrow officer. Raised in Alaska, Lyke spent her formative college summers working in the oil services industry, including construction jobs in Prudhoe Bay. Jennifer and her husband have lived in Portland for 25 years, raising their two teenage children and a five-year-old tuxedo cat named Mittens. She is a volunteer at Jesuit High School for sporting events, campus activities, and the theatre program.

Jennifer Lyke

Director of Operations

In addition to her decades of industry experience, Lyke holds a B.A. in Business Administration with an emphasis on finance and a minor in Art History from the University of Puget Sound.


ECONOMIC, DEMOGRAPHIC, AND RENTAL APARTMENT MARKET TRENDS By Jerry Johnson, Principal of Johnson Economics The COVID-19 pandemic continues to be a dominant factor impacting the regional economy. It impacts economic, demographic, and real estate patterns. Following an optimistic spring and early summer and rising vaccination rates, the emergence of the Delta variant has pushed back plans for reopening many sectors of the economy. Economic growth was robust through the summer as COVID-related restrictions were lifted, assisted by record levels of federal stimulus. While we remain hopeful that there is an eventual end to the pandemic—or at least significant economic disruptions—recent usage patterns and preferences associated with it may persist. The related uncertainty will have a substantive short-term impact on investor interest in certain asset classes and locations. Demand for multifamily housing is not expected to be negatively impacted, though, and household income levels increased during the pandemic due to the surge in stimulus money. As these funds dry up, it will be essential to see recovery in service economy employment. An area of recent concern is the increasing signs of persistent inflation, which has not been a significant factor in the market for the last three decades. An expectation

of continued low interest rates has been capitalized into land and property values. Any significant shift in interest and/or capitalization rates would substantively impact the real estate markets. Annualized inflation has been at its highest level since before the great recession in 2008. In addition, as demonstrated by the sharp run-up in construction materials costs in the last year, inflationary impacts can very directly impact the ability of the market to deliver new product profitably. The pandemic has substantively affected the supply chain, and ongoing issues are expected to continue over the next year or two. While challenging for the development market, increases in the replacement cost of new housing will provide pricing power for existing multifamily properties. The following chart shows trends in the annualized rate of growth in the Consumer Price Index (CPI) and includes the 16% trimmed CPI. [16% Trimmed-Mean CPI is a measure of core inflation that excludes the CPI components that show the most extreme monthly price changes.] Recent patterns show a pronounced uptick, and reports from many sectors of the economy indicate that this may be sustained for a more extended period.


Annualized % Change

8 7

Trimmed Mean CPI


Median CPI

5 4 3 2 1 0 1983-01-01 1984-01-01 1985-01-01 1986-01-01 1987-01-01 1988-01-01 1989-01-01 1990-01-01 1991-01-01 1992-01-01 1993-01-01 1994-01-01 1995-01-01 1996-01-01 1997-01-01 1998-01-01 1999-01-01 2000-01-01 2001-01-01 2002-01-01 2003-01-01 2004-01-01 2005-01-01 2006-01-01 2007-01-01 2008-01-01 2009-01-01 2010-01-01 2011-01-01 2022-01-01 2013-01-01 2014-01-01 2015-01-01 2016-01-01 2017-01-01 2018-01-01 2019-01-01 2020-01-01 2021-01-01


Source: U.S. Federal Reserve Bank of Cleveland




(continued next page)

4,000 Net Absorption 3,000






1Q01 4Q01 3Q02 2Q03 1Q04 4Q04 3Q05 2Q06 1Q07 4Q07 3Q08 2Q09 1Q10 4Q10 3Q11 2Q12 1Q13 4Q13 3Q13 2Q15 1Q16 4Q16 3Q17 2Q18 1Q19 4Q19 3Q20 2Q21

-2,000 Source: RealPage, CoStar, Johnson Economics


Central Stabilized Suburban Overall


Central Overall


6% 4%


Source: CoStar





















0 2Q11

Central Portland experienced a surge in new rental apartment deliveries in 2019 and 2020, which led to a significant rise in vacancy. The central market has performed well in 2021 despite many challenges in the core market, with the current vacancy rate in stabilized projects in Central Portland estimated at 6.1% at the end of the second quarter. The suburban markets have remained tight throughout, with the stabilized vacancy rate estimated at 2.8%. While the overall rate in Central Portland remains at 10%, when new projects are included, trends indicate a strong market rebound.



The Portland Metro Apartment market may be about to make up for the weakness of 2020, as strong demand is pushing vacancy down and rents up. The stabilized vacancy rate fell from 4.2% to 3.6% over the past quarter—the lowest level since 2015. In addition, annual rent growth has accelerated from 2.6% to 6.7%—the highest since 2016. On the demand side, the summer moving season coincides with a lifting of COVID restrictions, allowing for pent-up in-migration to the region. On the supply side, many new projects have opened in suburban areas where the demand is robust, while discounted rents and aggressive concessions have helped attract demand to urban properties. Over the past two quarters, 7,200 units have been absorbed on a net basis, the most substantial two-quarter period ever recorded in the region. In addition, the eviction ban may have contributed by constraining move-outs.




10% 8% Y/Y Change

6% 4% 2% 0% -2% -4%





















-6% 2Q11

A similar pattern is seen in rent growth. Suburbs remain considerably stronger than central areas, but the latter has seen more improvement over the past quarter. Currently, the average annual rent growth is 8.5% in the suburbs and 1.6% in Central Portland. Peripheral areas continue to outperform, led by Wilsonville (15.9%), Hillsboro (13.4%), and Clark County (+13.1%). Downtown Portland is the weakest when adjusted for concessions (+0.1%). Historically, the rental apartment market gains pricing power when vacancy drops below 5.0%. While the suburban markets are already tight, we expect the Central Portland market to get back on track sometime in 2022.

Source: CoStar


Johnson Economics tracks rental apartment projects under construction or planned in the Portland metro area. The metro area added 54 new projects to the pipeline, with 5,200 units in the second quarter of 2021. In addition, a total of 23 projects were completed, representing 2,400 new units during the same period. The projects initiated over the past quarter indicate

optimism among apartment developers in the suburban markets, with negligible new projects undertaken in Central Portland. Clark County saw the strongest increase, while the Close-in Westside was the only submarket with declines. The regional development pipeline now totals 45,600 units, representing an increase from the last quarter but a decline from a year ago.



Qtr ∆





Close-In Northeast





Close-In Southeast





Close-In Westside





Close-In North





Suburban East

Suburban East





Suburban South





Close-In North

Suburban West









Clark County

Total Source: Johnson Economics


Year ∆

Suburban West Suburban South

Clark County

Close-In Northeast Close-In Westside

Close-In Southeast




There were 4,300 units completed during the first half of 2021, which is expected to increase to approximately 7,000 units by the end of the year. Based on the pipeline, there is the potential for a continued elevated level of new introductions over the next several years. We have seen a reduced percentage of projects advance as higher construction costs impact project viability. As a result, we are tracking many projects, but quite a few of them will likely not be introduced to the market in the current cycle. The City of Portland has seen a sharp reduction in new multifamily residential permits, which likely reflects a combination of factors. These include short-term softness in the urban market due to an influx of new construction, the inclusionary housing mandate, pandemic impacts such as changing commute patterns, and an erosion in the marketability of downtown Portland. However, assuming we can return to a postpandemic usage pattern and the city’s various issues affecting street-level livability in the next few years, we expect another wave of urban development as the market tightens and rent levels rise to support new construction. In addition, the suburban markets are robust and attracting a lot of interest right now, with Clark County emerging as a significant player.

HFO Sale: River Run Village Apartments

102 Units in Gladstone, OR


The Portland metropolitan area had an inventory of 955,100 housing units in 2019, of which 353,200 (37%) are rental units. The shift in tenure (the split between renter/owner households) is a significant factor in projecting future demand for rental apartment units. For example, if the overall homeownership rate decreases 1% in the Portland metro area, that represents an increase in the net demand for rental apartments of over 9,500 units. The rapid rise in homeownership costs have placed this option out of reach for an increasing share of the market, significantly boosting the rental apartment market. While rental apartment construction levels have been relatively high in the last decade, this has been offset by sharp declines in single-family home construction, and the area remains undersupplied with housing. As a result, we expect that rental apartments will see continued strong demand, with tight market conditions and increasing replacement costs allowing for sustained pricing power in the market for the existing product. Jerry Johnson is the principal of Johnson Economics. He can be reached by phone at (503) 295-7832 x111 or by email at jwj@johnsoneconomics.com

WASHINGTON STATE’S MULTIFAMILY HOUSING UPDATE from the Washington Multi-Family Housing Association By Brett Waller, Director of Government Affairs The COVID-19 pandemic has resulted in the most significant property rights grab in the history of the United States and inserted the government directly into the daily operations of residential property management. Largely, eviction moratoria have been sustained at the federal, state, and local levels without addressing the underlying crisis. Housing is not free; on average, 90 cents of every dollar of rent pays the operating costs of a rental property. The unprecedented reach of the Centers for Disease Control moratorium was overturned because of impermissible use of agency power. State and local moratoria have been challenged as impermissible takings under the state and federal constitutions but have yet to receive a favorable ruling for the industry. In the face of these legal decisions, it is essential that if the government restricts the ability to enforce contractual obligations, they must provide just compensation to owners of rental properties.

Rental Assistance is Important but is not Moving Quickly Enough The blunt impact of an eviction moratorium is only muted by the broad accessibility of rental assistance.

Rental assistance is the most successful mechanism to support tenants experiencing financial hardship. As a result, the industry aggressively lobbied the federal government to help housing providers with robust rental assistance. In December 2020, Congress appropriated $25 billion in direct rental assistance to state and local jurisdictions across the country. Washington received $510 million. This investment is supposed to reimburse property owners burdened with tenants unable to pay rent because of pandemic-related job loss. In April 2021, Congress supplemented an additional

$22 billion in direct rental assistance to state and local jurisdictions. Washington received almost $469 million. In total, the State of Washington received more than $978 million in rental assistance. Despite this, the state has slowly trickled rental assistance dollars to those in need. It has also created unnecessary barriers to the acceptance of rental assistance, such as prohibitions on rent increases and limitations to terminations. We anticipate that by the end of the year, just 30% of these rental assistance funds will be spent across the country. Washington has spent roughly 10% of its rental assistance to date. Washington also created a permanent rental assistance fund through a new $100 document recording fee surcharge. Part of that document recording fee surcharge cures rent default after the tenant voluntarily vacates the property, creating a dedicated fund for tenants who skip. This successful fund has already approved more than $17 million in reimbursement claims.

A Pandemic of Tenant Protections

State and local lawmakers have created a pandemic of bad tenant protections at the expense of property owners who provide safe, affordable rental housing choices to Washingtonians. Some lawmakers disseminated misinformation campaigns about a tsunami of evictions that would lead to massive increases in homelessness. That has not materialized in Washington or elsewhere. The vaccine to solve this pandemic is to create a robust housing market that provides enough housing options at all levels of affordability to meet the needs of residents who choose rental housing as their home. In 2021, state lawmakers created a robust system to prevent evictions. Despite efforts to effectively eliminate all evictions by frustrating the summary proceeding process and making it prohibitively expensive, WMFHA fought back and helped to create a more balanced recovery package. (continued next page) THE NORTHWEST APARTMENT INVESTOR 23

WASHINGTON STATE’S MULTI-FAMILY HOUSING UPDATE (CONTINUED FROM PAGE 23) However, this recovery package of laws has been nonfunctional because of unnecessary extensions of eviction moratoria and local programs dragging their feet to become operational. First, whenever a tenant defaults on their rent, housing providers must offer payment plans equal to three months for every one month behind in rent before filing an unlawful detainer action. Second, housing providers must now provide tenants an opportunity to mediate nonpayment of rent cases before filing an unlawful detainer action, and tenants are provided the right to counsel. The Eviction Resolution Pilot Program is meant to resolve nonpayment of rent cases without necessitating court action. This process uses independent dispute resolution centers across the state to create a facilitated meet-andconfer process and adds approximately 14 days to the unlawful detainer process. Washington is the first state in the country to provide free counsel to indigent tenants who appear at a court hearing and qualify – earning less than 200% of the federal poverty level. The right to counsel effectively existed before 2021 due to the breadth of volunteer legal aid organizations. Now, tenant counsel will be required to formally appear, and agreements negotiated between parties will face future challenges when one party defaults. Finally, the state created a just cause eviction regulatory scheme to require housing providers to prove the basis for any termination of the tenant. This more complicated process to terminate a tenant further disrupts rental community safety and requires neighboring tenants to testify against their neighbors, escalating neighbor-toneighbor conflict. Most importantly, for the third year in a row, the rental housing industry defeated efforts to implement rent control in Washington. Senate Bill 5139 would have implemented rent control for a “limited” period postmoratorium. Senate Bill 5191 would have implemented controls on rent whenever a state of emergency exists. Rent control does not solve the housing crisis created by exclusionary zoning requirements and other costly regulatory barriers to building more housing; it only makes it worse.

It Gets Worse in Seattle

Local elected leaders believe that solving the housing 24 HFO INVESTMENT REAL ESTATE • (503) 241.5541 • WWW.HFORE.COM

crisis requires piling regulations on the rental industry instead of finding opportunities to reduce barriers to constructing more homes. Some affordable housing projects have had to return to the bank for more money to comply with onerous regulations increasing the cost to build units. The simple truth is there are more people than homes, and every regulation on housing providers increases the cost of housing and decreases the individual investor rental housing stock. Take Seattle, for example. Since 2015, the city has enacted more than 30 regulations on the operations of rental housing providers. Unfortunately, these regulations have only made Seattle’s housing crisis worse. Just this year, Seattle has: • Legislatively extended the eviction moratorium for nonpayment of rent for six months following the end of the Mayor’s state of civil emergency • Required housing providers to renew a lease regardless of contract requirements • Created a school year eviction ban that applies to all households with school-age children and all employees and contractors of daycare to 12thgrade schools • Required 180 days’ notice for all rent increases • Required payment of three months’ rent whenever the rent cumulatively increases by 10% or more over 12 months Seattle’s bad ideas are migrating to smaller jurisdictions across King County. Burien, Kenmore, Auburn, and unincorporated King County all passed similar tenant protections over the past year, further exacerbating the housing crisis across the Puget Sound region. Enough is not enough for tenant activists. We expect more threats to the industry coming in 2022. Rent control will continue to rear its ugly head with further efforts to disrupt the rental housing ecosystem under the auspices of power imbalance and making rental housing more affordable. This will continue to discourage rental investment in Washington. At the state and local levels, lawmakers need to summon the political courage to make more land available to housing. Until then, we’ll see more of the same. You may reach Brett Waller at brett@wmfha.org or by phone at (425) 656-9077.

2021 Tax Update By Trent Baeckl, CPA, Perkins & Co. In this space last year, we looked at the new Corporate Activity Tax (CAT) instituted for 2020 and its impact on multi-family real estate investments located in Oregon. This year two new taxes pushed Portland ahead of New York City and Los Angeles as the highest taxed city for those making more than $250,000 per year. Metro Supportive Housing Services Income Tax

In May 2020, voters approved Measure 26-210 that instituted a 1% tax on businesses and individuals living and operating in the Metro Transit District (Metro) covering Multnomah, Clackamas, and Washington counties. Effective for tax years beginning January 1, 2021, the 1% tax will be assessed on businesses with gross receipts over $5M for the year. In determining gross receipts for the year, it is essential to note that only taxable gains on the sale of a building is counted— and not the gross sales price of the building. Deferred gains on a 1031 exchange would also defer this 1% tax. A parallel 1% tax is also assessed on individuals with taxable income over $125,000 ($200,000 for joint filers) sourced to Metro. For residents of Metro, this will include all forms of income, regardless of where it is earned. However, nonresidents of Metro will only be subject to the tax if their income earned from Metro businesses exceeds the $125,000/$200,000 thresholds.

Multnomah County Preschool for All Personal Income Tax

In November 2020, voters approved Measure 26214 which introduced a new personal income tax on Multnomah County residents and nonresidents with income derived from sources within Multnomah County. Also effective for tax years beginning January 1, 2021, the tax is 1.5% on taxable income above $125,000 ($200,000 for joint filers). The rate increases to 3% on taxable income over $250,000 ($400,000 for joint filers). These rates are effective for tax years 2021-2025. Starting in 2026, the rates will be 2.3% and 3.8%, respectively. For individuals subject to this Multnomah County tax that receive pass-through income from either a partnership or S corporation subject to the Multnomah County business income tax, there will be a deduction for mutually taxed income, which ensures that the same income won’t be taxed twice.

Likewise, Multnomah County residents that claim a credit for taxes paid to another state on their Oregon income tax return will receive a similar credit against their tax liability. The Metro tax contains comparable deductions and credits for individuals receiving pass-through income from businesses subject to the Metro tax.

Federal Tax Reform

This fall, there have been two sets of tax proposals put forth in Washington DC. On September 13, 2021, the House Ways and Means Committee released a proposal of recommended tax increases and tax cuts. The proposal includes changes to individual, corporate, and estate taxes effective for tax years beginning after December 31, 2021, except as noted below. The most relevant proposals to investors in rental real estate include: • Increases to the top marginal income tax rate to 39.6% on income over $400,000 for single individuals and $450,000 for joint filers. The current top rate is 37% on income over $523,601 single and $628,301 joint; • Increase in capital gains rates to 25% for transactions occurring after September 13, 2021. The current maximum capital gain rate is 20%; • Expansion of the net investment income tax (NIIT) which includes the income derived from ordinary trade or business and gains on the disposition of assets in nonpassive activities. Previously, the materially participating real estate professional designation protected this income from being subject to the 3.8% NIIT. In addition, the expansion would apply to modified adjusted gross income above $400,000 for single and $500,000 for joint filers. Currently, the NIIT applies to modified adjusted gross income above $200,000 for single and $250,000 for joint filers; • Decrease in the estate tax exclusion to $6,030,000. Currently, the exclusion is $11,700,000; (continued page 28) THE NORTHWEST APARTMENT INVESTOR 25

j.r. johnson, llc


Working with J.R. Johnson for Restoration and Repair Work has Many Benefits Fall is budget season for many management companies. J. R. Johnson can support those efforts in a variety of ways. Forecasting short-term and long-term repairs can be a valuable tool in developing budgets that encompass the full range of needs for your property. J.R. Johnson’s experienced team of professionals can identify scopes of work that can be completed in multi-year phases, thus allowing for proper revenue allocation to soften the impact of large-scale projects. With over 50 years of local expertise in multi-family, HOA, and commercial restoration and renovation work, we can examine past records of thousands of projects for cost analysis and scope development. In addition, J. R. Johnson can provide a cost/benefit analysis of upgrading your asset’s windows, doors, decks, and siding. With so many options within each of these categories, we can determine which option will create the most value per dollar within your budget. The last 18 months have been a challenge in so many ways. The impacts from COVID-19 restrictions, distancing mandates and closures have delayed and prevented construction projects from being completed. The remainder of 2021 and 2022 will be a prime opportunity to catch up on the delayed projects and assess whether your asset has any deferred maintenance needs. In the Northwest, we all know how tricky water can be at getting into places where it should not be. When this happens, the health of your buildings can sometimes be far worse than they appear. It all starts at the top: J.R. Johnson’s roofing department is equipped to assess the health and remaining lifespan of all roof types. Making sure that gutters and diverter flashings are installed correctly will help prevent overflow during heavy rains. This, in turn, will protect your siding and mitigate damage to the soil and landscaping below. Failing roofs and gutter systems are a significant contributor to water penetration issues, which in turn opens the door to wet rot, dry rot, mold, and a host of other problems. A budget tailored to allow for annual repairs, capital improvements, and the occasional surprise will ensure that your property’s health is at its best. The experience and expertise of the teams at J. R. Johnson are well suited to help you develop a budget that makes it possible for you and your asset to perform at the highest levels. In addition to a comprehensive property budget, it is vital to have an emergency response plan in place. This should include emergency contacts, non-emergency contacts, a site map identifying all utility shut-off locations, and clearly marked exit paths from building(s) and the entire property. J. R. Johnson can handle your fire, flood, storm, and weather damage needs with 24/7 response. We are never closed and always ready to provide top-tier, comprehensive responses to your emergency situation. At J.R. Johnson, our legacy is built on our reputation as industry leaders, offering a complete portfolio of construction and restoration services dedicated to delivering the highest quality and care for all projects from start to finish. Our personalized project management, expert teams, and strict quality control guarantee craftsmanship you can trust.

building Quality partnerships since 1970 @jrjohnsonllc | 503.240.3388 | info@jrjohnson.com | jrjohnson.com

Oregon Economic Update: The Future is Bright By Amy Vander Vliet, Metro Region Economist – State of Oregon Employment Department

After plunging into a deep recession in 2020, Oregon is on track to add the largest number of jobs on record this year. According to the latest forecast from the Office of Economic Analysis (OEA), the state will add more than 100,000 jobs between the fourth quarters of 2020 and 2021. The state will regain all of the pandemic job losses by the summer of 2022. OREGON RECESSION COMPARISON 1.05 Peak Employment Indexed to 1

The recovery is different from past cycles. It will be faster than our emergence from the tech bubble, the housing crisis, and earlier downturns. Major reasons: (1) We entered the recession on solid footing—it wasn’t caused by a financial crisis, industry collapse, or policy error; (2) There was a swift and strong policy response and thus far we haven’t seen major structural or permanent damage; and (3) Unlike the past several ‘jobless’ recoveries, demand is strong.





0.95 0.90 Full recovery by the summer of 2022

0.85 0.80 Peak









Source: Oregon Employment Department and Office of Economic Analysis

The key driver underlying OEA’s optimism is the strength of household finances—Oregonians have money to spend. Federal assistance has boosted incomes, and wages have recovered and continue to rise. If Oregon is like the nation, residents have increased their savings and lowered their debt. Additionally, stock market gains and rising home equity have given households access to greater wealth. And they have pent-up demand. After nearly two years of living with restrictions, Oregonians have built up demand for vacations, restaurant meals, haircuts, and medical services that were postponed during the pandemic. The question is not if, but how much, consumers will spend. OEA’s forecast doesn’t depend on consumers drawing down savings or increasing debt, but rather continuing to spend their growing income.

Recovery Timeline Varies by Industry


While OEA expects Oregon to return to pre-pandemic employment levels by the middle of next year, the timeline varies significantly by industry. Several major sectors will recover sooner than the overall economy:

• Transportation, warehousing, and utilities have already recouped pandemic losses. They barely felt the recession as spending on goods remained strong and as consumers increasingly turned to e-commerce, which bolstered employment at warehouses and delivery companies. • Professional and business services will be the next sector to recover, reaching this milestone by the third quarter of 2021. This industry includes a large proportion of office-based jobs, many of which can be worked from home. • Construction will also make a full recovery in 2021 after a relatively modest decline in the early months of the pandemic. Growth will be powered by new single family construction and renovations. • Manufacturing as a whole won’t return to prepandemic levels within the forecast period (2021) due to the long-term structural decline in durable goods manufacturing. However the nondurable goods component (e.g. food, beer) will bounce back from recessionary losses by the beginning of next year. (continued next page) THE NORTHWEST APARTMENT INVESTOR 27

OREGON ECONOMIC UPDATE: THE FUTURE IS BRIGHT (CONTINUED FROM PAGE 27) Two sectors that bore the brunt of the recession will take the longest to recover: • Leisure and hospitality employment plummeted during the pandemic (43%), and while growth will surge this year and next, a full recovery is still several years away. OEA is factoring in the possibility that consumers will be slow to return to restaurants, and that a long-term shift to working from home (at least partially) will reduce demand for downtown restaurants and bars. • Other services, which includes many consumerfacing businesses, slashed one-quarter of its workforce as hair, nail, skin care, and other personal service businesses closed—temporarily or permanently— due to public health measures. It regained half of lost jobs over the past year and will add several thousand more this year, but growth moderates in late 2022 and beyond. Some industries will struggle to return to pre-pandemic employment levels within the forecast period: • Several components of durable goods manufacturing are facing structural changes pre-dating the recession, including metals and transportation equipment manufacturing.

• Brick-and-mortar retail lost market share to e-commerce during the pandemic. While OEA expects it to recoup most of these losses, long-term trends point to flat growth as on-line sales become more entrenched in consumers’ shopping habits. OEA acknowledges that there are risks to the forecast— mainly to the downside. The biggest are potential supply side constraints. If firms continue to struggle with labor shortages and can’t hire as quickly as they’d like, a full recovery could be pushed back to later in 2022. OEA also considers the delta variant a risk that could impact consumer spending and demand—more in the shortterm than the longer run. The OEA’s complete report is available at www.oregon.gov/ das/OEA/Pages/forecastecorev.aspx. You can reach Amy Vander Vliet by email at Amy.S.VanderVliet@oregon.gov or by phone at (971) 804-2099.

2021 TAX UPDATE (CONTINUED FROM P. 25) • Expansion of taxable estates to include assets owned by grantor trusts; • Elimination of valuation discounts for gifting of nonbusiness assets, including those from passive activities On October 28, 2021, President Biden released his tax reform framework in his Build Back Better plan. This proposal is significantly pared back compared to the House proposal and focuses on surtaxes on individuals and trusts with adjusted gross income in excess of $10,000,000 and $200,000 per trust or estate, respectively. However, relevant to real estate professionals, the president’s plan retains the expansion of the NIIT included in the House proposal. However, based on recent history, resolution on which proposal provisions end up in the final legislation likely will not occur until mid-December. This limits the amount of advance tax planning that can be done before yearend, but deferring deductions until 2022 and accelerating income into 2021 should be considered in any event.

HFO Sale: Cedar Gardens Apartments

96 Units in Klamath Falls, OR


Trent Baeckl is a CPA and shareholder at Perkins & Co. where he specializes in real estate. You can reach Trent by email at tbaeckl@perkinsaccounting.com or by phone at (503) 802-8626.

Oregon’s Delays on Distributing Rent Relief Funds Unites Landlords and Tenants in Frustration By Jennifer Shuch, Portland-based Student in USC’s EMUP Program It is no secret that the COVID-19 pandemic has disrupted peoples’ lives and livelihoods over the past year and a half. Nationwide, people have faced layoffs, illness, family tragedies, furloughs, and business closures. Federal assistance helped mitigate some of these hardships through Paycheck Protection Program loans and enhanced unemployment benefits. Still, many of these lifelines are expiring as the pandemic continues into its second year. For example, in Oregon, an eviction moratorium was put in place to keep people housed until rent relief could be distributed, but the state has been slow to provide payments, frustrating property owners and tenants. Federal aid to Oregon consists of $204.37 million in statewide funds administered through the Oregon Emergency Rental Assistance Program (OERAP) and an additional $76 million for the City of Portland and Multnomah, Washington, and Clackamas Counties. Oregon Housing and Community Services administers the OERAP program. The money is intended to help renters pay past due rent or utilities if they face COVID-19 related hardships. The application portal opened May 19, 2021, and as of November 4, a total of 43,261 renters had applied. By November 4, $119.94 million had been paid to 18,204 households. According to the OERAP dashboard, 86% of statewide program funds have already been paid or are currently obligated, but approximately 60% of applications are still either in review or waiting for action from a landlord or applicant. Multnomah County has been the slowest to distribute the funds. According to the Multnomah County website, renters there have completed applications for a total of $93 million as of October 21. Still, only $38.576 million has been paid or assigned so far. 14,610 households have completed applications, but just 5,279 have received funds. 49% of Multnomah County applications are currently in review, meaning that they are either pending review, in the initial review stages, or undergoing a final review. 33% of Multnomah County applications have been submitted for funding. While the aid was distributed by a network of social service organizations, the application portal was centralized on the OERAP website. Agencies complained

over the summer about backend problems with the site that slowed down the distribution process. Prior to OHCS contracting with Public Partnerships LLC (PPL) in August, local organizations ran their own processes. OHCS hired PPL to process a backlog of 8,500 OERAP applications and is considering hiring the company to process an anticipated $156 million in rent relief this fall. According to The Oregonian, OHCS Executive Director Margaret Salazar argued that the centralized portal system was adopted as a best practice from other states. The delay in distributing rent relief funds has hit landlords and tenants hard. Statewide, 60,000 households are behind on a total of $158.7 million in rent, according to the National Equity Atlas. The application for relief is 27 pages long and must be done on a computer. Social services organizations, already stretched thin during the pandemic, are working to assist renters with the applications. However, 22% of the applications that the state has received are incomplete, meaning that over 12,300 households statewide have submitted applications that are not yet in the queue for review. In September, Kim McCarty, executive director of the Community Alliance of Tenants (CAT), urged legislators at the state capitol to protect tenants. While speaking in Salem, she emphasized that “the Oregon rental assistance program is failing.” This seems to be a rare issue where tenant and landlord advocates agree. Both sides want the state to improve its application, review, and distribution system to prevent mass evictions. However, the two groups differ on extending renter protections (continued next page) THE NORTHWEST APARTMENT INVESTOR 29

STATE DELAYS ON DISTRIBUTING RENT RELIEF FUNDS UNITES LANDLORDS AND TENANTS IN FRUSTRATION (CONTINUED FROM PAGE 29) in light of current delays. The state’s eviction moratorium ended June 30. Still, tenants who can prove they have applied for rental assistance can provide their landlords with a 60- or 90-day safe harbor letter. The CAT advocates argue that this is not enough. They are urging Governor Brown to extend the eviction moratorium until all rent relief funds are distributed. But to the CAT’s frustrations, the Governor’s office has expressed concerns over the impacts of the ongoing eviction moratorium on property owners. It is not yet clear whether the state’s decision to outsource the application review process during the next round of funding will improve the system and speed up the distribution of funds. But landlords and tenants are clearly running out of patience.

HFO Sale: Forest View Apartments 26 Units in Portland, OR • $4,000,000

HFO Sale: Holcomb Heights 18 Units in Oregon City, OR

RESHAPING THE LANDSCAPE OF THE REGION Since its founding in 1982, Ball Janik LLP has become widely recognized as an industry leader in the areas of real estate and land use. We serve public and private clients in all phases of commercial development, leasing, acquisition, dispositions, financing and equity arrangements, restructuring, and workouts. info@balljanik.com www.balljanik.com 503.228.2525


The Latest in the Battle to Preserve 1031 Exchanges By Mark Adams, Staff Attorney, Beutler Exchange Group

Conspicuously Absent. These words describe the current status of 1031 limitation or elimination language in Congressional tax drafting bills. Our industry’s coordinated information campaign, emphasizing the invaluable nature of this 100-year-old code section, has resonated, and our level of confidence that 1031 will remain unchanged is quite high. Ultimately, the message that we relentlessly presented to the senators and representatives we spoke with is rooted in the reasons 1031 was first enacted. The legislative history of 1031 clarifies two primary purposes for its passage: 1) to avoid unfair taxation of ongoing property investments and 2) to encourage active reinvestment. Frequently, a reduction in the administrative burden of agricultural-centric exchanges is cited as the primary purpose, but it was really an ancillary benefit.

billion tax revenue generated by implementing a $500,000 cap on exchange transactions. However, we know the battle to maintain the status quo for this code section is not finite with this Congress or the next. We will continue to educate the decision-makers and advocate our position with regards to 1031. A conspicuous absence is often not a good thing, but it is a great opportunity for a real estate industry regarding Section 1031 and a draft tax bill in Congress. By Mark Adams, Attorney, Horenstein Law Group (formerly with Beutler Exchange Group). You can reach Beutler exchange group about 1031 exchanges by email at toija@beutlerexchangegroup.com or by phone at (503) 748.1031.

As advocates of 1031, we know that these reasons are as valid today as in the past. We see it in our business daily. Enabling taxpayers to make real estate investment decisions without the friction created by imposing taxes on new investments stimulates the economy by encouraging transactional activity. Recent economic studies reveal that if 1031 is eliminated or limited, real estate activity will obviously decrease, resulting in an increased cost of capital and overall GDP contraction. Some additional findings reflecting the benefits of 1031: • 568,000 jobs, including $27.5 billion of labor income and a total of $55.3 billion added to the U.S. economy • $7.8 billion in annual tax revenue on the abovereferenced income • $6 billion in additional income taxes paid by exchangers due to foregone depreciation • $1.95 billion generated from a proposed $500,000 cap (estimated by Treasury) These statistics emphatically reinforce the economic benefit 1031 provides, instead of the estimated $1.95 THE NORTHWEST APARTMENT INVESTOR 31


CRE Financing Trends Q4 2021

By Blake Hering, Principal, Gantry

The abundance of capital in the multifamily sector post-COVID continues to drive the active investment market we see today. The uncertainty that ultimately became resilience defined 2020. With so many lenders sidelined most of last year, 2021 has become a hyperactive year to play catch up. In general, this is great for borrowers. They can expect that multifamily will remain a top target for capital sources moving forward, at least with Gantry’s roster of more than 100 lenders. However, this year has also presented a different set of post-COVID challenges for the relationship between multifamily sponsors and lending sources. Asset class performance and red-hot investor demand have increased valuations, compressed cap rates, and reset lender origination priorities. As a result, it is a great time to be a seller and an even better time to refinance for a long-term hold in this market. At the same time, abundant capital and low borrowing rates suggests that it is a great time to buy under the right circumstances, but it is becoming difficult for lenders to meet buyers’ LTV expectations in this climate. At the intersection between the buyer, owner, and lender, Gantry is in an opportune position to offer options as we strategize the final quarter of 2021. Capital allocations from lenders towards commercial real estate will remain at all-time highs, with rates holding at what have been called generational lows. As a result, there are tremendous loan programs with favorable terms offered at low rates. Gantry specializes in identifying the best of these products. Let’s take a moment to look at today’s reality through a focused lens.

Acquisition Financing: 65 is the New 75…for now

Historically, it was common for sponsors to leverage up to 75% LTV for qualifying apartment acquisitions. Today, lower debt coverage thresholds across the board spur higher equity requirements. The once conservative 65 has become the new 75 for lenders. Cap rate compression in the current cycle is partly caused by an abundance of capital chasing limited assets. This has thinned out lender debt coverage. As a result, more equity is now required. Even agency lenders are struggling with underwriting acquisition financing above a 65% threshold. However, interest-only loan terms can help fuel even better cash flow. 32 HFO INVESTMENT REAL ESTATE • (503) 241.5541 • WWW.HFORE.COM

Refinance: Life Companies Stand Ready to Lock-in Low Rates

Life company lenders are especially active in the longterm debt space, offering some of the best 10- and 15-year loan products available. The willingness of life company lenders to lock rates upfront at loan application is the “why” many borrowers are looking for to pay off existing loans that may not mature for six, nine, or even 12 months. Now is the time to capitalize on this window of historic low-interest rates. Rates have increased over 25 basis points in the last few weeks. It is expected that rates will continue to rise into 2022 and beyond.

At Gantry, independent thinking is in our genes. As the largest independent firm, we take a thoughtful and intentional approach to everything we do. So, as our industry consolidates and becomes less personal, we push ourselves to ignore convention, to set a high standard and to always prioritize people ahead of transactions.

2020 Loan Production $3B closed 400+ loans closed 100+ unique lenders 45 production teams 2020 Loan Servicing $17B servicing platform 2,000+ loans S&P rated Primary Servicer

For those seeking a partner that delivers more, we’re a little different. The right kind of different.

Blake Hering bhering@gantryinc.com (503) 905-9102

Bryant Bushnell bbushnell@gantryinc.com (503) 905-6824


Not all Condition Assessments are Created Equal Property Condition Assessment (PCA)

Facility Condition Assessment (FCA)

By Matt Smith, President at Forensic Building Consultants

Suppose you’re a multi-family building owner, acquisition director, asset manager, or loan officer. In that case, you know why it’s essential to thoroughly understand the properties’ current condition in your charge. Condition assessments are a vital part of understanding your current and prospective properties and how you can maximize a particular property’s efficiency and profitability. I’m often asked the difference between a Property Condition Assessment (or PCA) and a Facility Condition assessment, also known as an FCA. Some clients use the two interchangeably, yet they are very different services. When planning for and scheduling condition assessments, it can be confusing to know which one you will need. A PCA, also known by some industry folks as a Property Condition Report or Commercial Building Inspection, is an assessment of a commercial real estate property based on a thorough building assessment, including all improvements and all systems of each building on the property. A PCA is typically ordered as part of the due diligence process when a property changes hands. For example, a lender may request a PCA before issuing a loan, or an investor/buyer may request the assessment before a purchase.

The assessment scope is defined in ASTM E2018-15: Standard Guide for Property Condition Assessments: Baseline Property Condition Assessment Process. This document is sold as a PDF or hardcover book by ASTM. Depending on a client’s needs and preferences, some PCAs are completed by an individual building consultant. Others can require the involvement of other specialists, such as a structural, electrical, or mechanical engineer. The primary goal of a PCA is to identify, document, and report on the following:

Building Enclosure Site & Grounds Interior Building Components

Structural Systems Mechanical Systems Regulatory Compliance

The most essential elements of any Property Condition Assessment and Report are the Immediate Repairs Table (IRT) and the Replacement Reserve Table (RRT). The Immediate Repairs Table identifies capital needs with associated price estimates, notes failing or damaged building systems and components, and life safety issues. The Replacement Reserve Table identifies long-term capital expenses based on the expected useful life of the building systems and components. (continued next page) THE NORTHWEST APARTMENT INVESTOR 33

NOT ALL CONDITION ASSESSMENTS ARE CREATED EQUAL (CONTINUED FROM PAGE 33) While similar to PCAs, Facility Condition Assessments (or FCAs) serve a different purpose for the end-user. Typically prepared for commercial building owners or managers of real estate portfolios, FCAs help building owners understand and maintain the physical condition and value of their portfolio assets, develop capital improvement budgets, and prioritize essential repairs and resources. Additionally, Facility Condition Assessments can help secure additional capital funding.

FCA is designed to serve as a functional tool to maintain a commercial property over time, it should have more detailed cost estimates for repairs and/or replacement of systems and equipment than what you will find in a PCA report.

Like PCAs, an FCA involves a thorough property condition assessment, typically performed by a team of building specialists.

So, in short, PCAs & FCAs are similar assessments that serve very different purposes:

The primary goal of an FCA is to identify, document, and report on the following:

Systemic Deficiencies Routine Maintenance Deferred Maintenance Remaining Useful Life of all Major Building Systems & Components Capital Replacement Needs

Compliance with the Original Design Intent Material Compatibility with Adjoining Systems & Materials Prioritized List of Repairs & Associated Costs Material & Scope Alternates with Associated Cost

Ultimately, an FCA’s data should result in a real-world projection of expenses for the maintenance of the assessed property over a pre-determined timeframe.

A PCA is generally requested before a commercial property is sold. It will characterize the asset at a particular point in time by providing a general overview of the costs associated with correcting existing deficiencies and estimating the costs of maintaining the property over time. An FCA is generally requested by asset managers with long-term capital planning needs. It will characterize the asset in detail, including a more exhaustive inventory of existing systems and components, providing specific data regarding repair and maintenance. As a result, an FCA will allow for more accurate projections of capital expenditures and maintenance costs over time.

Total of Building Replacement Cost

Matt Smith is the President of Forensic Building Consultants. He can be reached via email at matt@forensicbuilding.com or by phone at (503)-772-1114

FCAs also include the systems of each building. In contrast to a PCA, an FCA report will contain a much more thorough accounting of the material components of each system on the building, usually in the form of categorized inventory sections. In addition, because an

HFO Sale: Tiffany & Clay Student Housing

62 Units in Portland, OR


HFO Sale: Washington Arms

16 Units in Longview, WA


Coho Run Apartments

Kaya Camilla

Brookshire Meadows

103 Units • Gresham, OR • In Contract

36 Units • Portland, OR • Call for Info

128 Units • Beaverton, OR • In Contract

Camellia Park

Hidwell Apartments


58 Units • Beaverton, OR • In Contract

13 Units • Portland, OR • In Contract

13 Units • Portland, OR • In Contract

COMMUNITY GIVING For the fifth time in the company’s 22-year history, HFO has been recognized by the Portland Business Journal as among the area’s top corporate philanthropists in its size category. The recognition was announced recently at an annual celebratory event. HFO ranked 3rd in its category overall, with total cash contributions of $83,509. These funds helped support numerous charities throughout the year, including Harbor of Hope, Transition Projects, and Face to Face Portland. “We’re grateful to our clients for putting their trust in us,” said HFO marketing director Aaron Kirk Douglas. “Their ongoing support of our business makes it possible for us to continue growing our philanthropic impact. During the pandemic we were able to step up and contribute the largest amount of cash in our company’s history.” Each year, the Portland Business Journal ranks the most generous corporate philanthropists in four categories. For years HFO has ranked among the top 25, but this year marks the fifth time HFO has been in the top 10 for area businesses with annual revenue of $10 million or less. HFO regularly contributes to charity for each transaction of the client’s choice. In addition, the company utilizes a matching fund from which it makes annual year-end donations to select nonprofits.


Investor Roundtable Wednesday, January 5th, 2022 | 11:30 am – 1:00 pm

A 2022 Virtual Event Multifamily investors are invited to sign up for our free annual event which will be online for 2022. SPEAKERS Economist John W. Mitchell with an update on the Pacific Northwest & U.S. economy Plus: interviews with Oregon gubernatorial candidates and candidates for Portland City Council To RSVP, E-mail info@hfore.com or call (503) 241.5541 with your name and email address.

You must RSVP to receive the link by email Build your legacy

HFO Investment Real Estate (503) 241.5541 • www.hfore.com Sponsored in part by

Build your legacy

HFO Investment Real Estate (503) 241.5541 • www.hfore.com