The lender that financed Field Office, the sleek blue office complex on Northwest Front Avenue just northwest of the Fremont Bridge, has been unable to sell the $73.8 million loan on the defaulted property, a person familiar with the matter said, a sign that investors remain wary of Portland office space.
The owners of Field Office defaulted on the loan earlier this year. In lieu of foreclosure, the lender solicited bids on the loan with a bid deadline of Aug. 15, according to an email advertising the sale obtained by WW. The sale drew interest but not at a price that was palatable to the lender, the person said.
“It’s in limbo,” they added.
Buyers often bid pennies on the dollar in such sales. Field Office’s current assessed market value is $62.7 million, according to property records, $11 million less than the loan amount.
Field Office is owned by an LLC controlled by New York investment bank Goldman Sachs and Lincoln Property Co., a Dallas-based real estate firm. It’s a 290,375-square-foot complex of two six-story buildings geared toward technology firms with young workers. Such companies were flocking to Portland from California when Field Office was built in 2018. That migration stopped in 2020 as the pandemic changed work patterns.
Field Office has a rooftop deck, a gym, parking for 200 bicycles, and electric scooter charging stations. It was built for $108.4 million by local developer Tom Cody, founder of the firm Project^. The LLC controlled by Goldman and Lincoln bought it in April 2019 for $118 million, according to public records.
Lincoln Property declined to comment on the matter.
Downtown Portland office buildings are still losing tenants almost four years after the pandemic arrived in the U.S. and riots rocked downtown Portland in the wake of George Floyd’s killing. The quarter ended Sept. 30 marked the 14th in a row that the greater Portland area had “negative net absorption” of office space, according to Colliers, a Toronto-based real estate firm that tracks vacancies.
“Negative net absorption” is real estate-speak for more office space becoming vacant than getting filled.
Greater Portland had a vacancy rate of 20.4% in the third quarter, according to Colliers. The central business district fared far worse at 27.3%, Colliers said, while the western suburbs outperformed at 13.2%
Some good news: Colliers said the rate at which office space was becoming vacant had slowed. Just 201,000 square feet, net, became vacant in the third quarter, the lowest amount in seven quarters.
And there were actual sales of office buildings, too. In September, Menashe Properties said it bought the 183,735-square-foot American Bank Building for $13.6 million, betting that enough tenants would return post-COVID to make office investments pay off again.
Menashe says it got a deal as the buyer in “the lowest dollar-per-square-foot sale in downtown Portland in recent history.” At $13.6 million, the price works out to about $75 a square foot. The last time the building changed hands, in 2014, the price was $45.1 million, or $245 a square foot.
But more gloom is likely to come, Colliers said.
“Despite this encouraging trend line, an extensive amount of leased office space is expected to expire through 2025,” Colliers said. “In Portland’s downtown market sector alone, more than 1.3 million square feet of leases are set to expire. While some of the tenants with expiring leases have made commitments on future office space, many of those commitments are in the suburbs. Established trends through this downward-trending period indicate that tenants that choose to remain downtown are likely to reduce their real estate footprint.”