More Bend Briefs--Tetherow, LA air service etc.

            Green shoots of Spring? Bank reports 2012 profit

Another sign that  Bend and Central Oregon are clawing out of a deep recession hole might be found in the recent 2012 earnings report for locally- based Bank of the Cascades.

            In the depth of the economic curve the bank was under federal scrutiny of its reserves and required an infusion of investor capital from a major shareholder.

            But for 2012 the Bend-based bank has reported net income of $6 million, including $1.3 million in the fourth quarter.

            The profit is still far from the more than $35 million net in 2006 as the real estate bubble inflated along with the bank’s real estate loan portfolio.  In 2010  the bottom line was more than $47 million in the red.

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            Bend gets extension on UGB plan

“Kicking the can down the road” has become an overused turn of phrase with the rolling federal budget and deficit debate.

            It could be argued the cliche applies to the City of Bend’s continuing effort to come up with an urban growth plan that satisfies state officials.

            The city recently received a 4-year extension from the state Land Conservation and Development Commission to correct an earlier plan for expanding the urban growth boundary (UGB) by 8,500 acres, which the commission rejected in 2010.

            Bend had pleaded with the LCDC that the additional time was necessary to synchronize the UGB update with long-term fixes to its water and sewer systems, both delayed by budget constraints and political considerations.

            State land use law requires municipalities to develop 20-year plans to provide adequate acreage for growth. The state has previously maintained that Bend’s plan should have given greater consideration to undeveloped infill land within the existing UGB and that it lacked sufficient density to avoid urban sprawl.

***

           

            Lodging construction begins at Tetherow

            After several years plagued by shifting multiple owners and a bad economy, construction could begin in April on lodging facilities that were part of the Tethereow  golf-oriented resort’s original master plan.

            A key investor-owner of the existing clubhouse and 18-hole links style golf course said initial construction would include two hotel buildings with 50 rooms, 24 in one and 26 in another. Altogether the state requires a minimum of 150 overnight rooms but Tetherow has received extensions from Deschutes County to meet that goal.

            Chris Van der Velde, an owner of the Tetherow clubhouse and golf course along with about 100 lots, has been the key public face of Tetherow during a difficult few years.

            His group is one of four with interest in various Tetherow components. They  include publicly-traded iStar Financial of New York, Joe Weston of Portland and Virtual Realty Enterprises of St. Louis.

            Tetherow was originally planned by Bend developer Don Bauhofer, who has relinquished much of his ownership. iStar now controls more than 150 unbuilt lots in the project which could include more than 350 residential homes.

***

            Up up and away...

            After a lapse of several years it now appears that Central Oregon will again have nonstop daily roundtrip flights to the Los Angeles area.

            Roberts Field and economic development officials announced March 25 that a goal of $350,000 had been collected in an effort to secure commercial flights by American Airlines.

            The carrier had required the guarantee as a condition of beginning the Redmond to LA service, which would be the first to the Calfornia metropolis since Horizon Airlines ended the route in 2010 after four years.

            While not yet assured, the fund raising is a major step. The $350,000 would be part of a $1.2 million package that includes marketing the route, guaranteeing revenue to offset expected early losses and waiver of airport landing fees. Of that $500,000 is from a federal Small Community Air Service Development grant.

            American has yet to make an formal announcement of the service, rates or time of the flights. But service could begin for the critical summer tourist season if the airline moves ahead.

            The region also has nonstop daily roundtrip flights to Portland, Seattle, San Francisco, Salt Lake City and Denver through Horizon, Delta and United Airlines or their affiliates.

***

         

           

Housing advisor says recovery only in 1st or 2nd inning: Labor shortage slowing construction

            The stories are nothing new. This or that analyst or investment advisor was either very smart or lucky and predicted  an inflection point in stocks, the housing market or the overall economy.

            That said, financial news network CNBC has gone to the analyst reported to have predicted a rapidly inflating housing bubble in 2005, and who now says the market began a turn for the better in 2012.

            On a recent CNBC segment--with no hesitation-- Ivy Zellman of  Zelman Associates predicted, “I think we’re in Nirvana for housing.”

            Among Zellman’s points:

·        Residential housing inventories are at 30 year lows.

·        Mortgage rates are at historic lows

·        Rent inflation is driving buyers into home ownership

·        Consumer sentiment is increasingly positive

          Zellman likened housing to a tanker that has been headed in a negative

direction for seven years and is now turning around.

            She predicted that the national market could continue an upward move for the next five to six years with prices potentially increasing by 20%.

            Regarding homebuilder stocks, as an investment advisor Zelman says she is reluctant to tell her clients that “we’re in the 1^st or 2^nd inning of housing  and that it’s time to sell when there could be a runup of five to six years. Catch the video at CNBC.

http://video.cnbc.com/gallery/?play=1&video=3000152867

Another factor: Worker shortage

On the heels of the Zelman interview March 7, CNBC’s real estate editor Diana Olick reported that new statistics show housing construction jobs are at the highest level in six years.

However, there’s a critical lack of workers to fill positions, due in part to those who left the industry for greener pastures. Many are now said to be flocking to energy boom states such as Wyoming and South Dakota.

Olick reported that housing starts are up 24% across the country, but employment for plumbers, electricians and other subcontractor fields has risen only 3%.  The result is extending the completion cycle on some housing to as much as 15 months.

The situation is especially dramatic in Las Vegas, once the foreclosure capital of the country, where new housing starts among some builders are up 100%, Olick reported.

One of the problems noted in the report is that lenders have been hesitant to finance new construction in some areas, putting the squeeze on builders who need upfront capital to hire and begin construction.

The Olick report: http://goo.gl/iA7Vb

From the Bend Briefcase-updates on continuing issues

              Mt. Bachelor Expansion: the Northwest’s leading dry snow ski mountain now has approval to move ahead with expansion plans to include new base facilities, upgraded chairlifts and ski runs, a chairlift to serve mountain bikes, hiking trails, a climbing wall and zip line.




Mt. Bachelor in summer as viewed from 
a kayak on Sparks Lake

 

            Deschutes National Forest officials announced the approval in mid-February, triggering a 45-day appeal period that would end April 1. Bend tourism proponents say the mountain plans are good news for the region’s tourism based economy. Mountain operator Powdr Corp. of Park City, Utah says the plan would put Mt. Bachelor in the category of a national ski destination.

            Mirror Pond: Maybe no other Bend scenic site defines the city’s visual charm than iconic Mirror Pond of the Deschutes River as it slows on it’s way through town along historic Drake Park.

            But the gently flowing stretch, popular with kayakers, canoeists, paddleboarders and tubers, has for decades been plagued by silt buildup that threatens to clog the channel.

            The city has appointed committees and hired consultants to find solutions could include dredging again, or reestablishing a free flowing stream that was blocked in the early part of the 1900s with construction of the Newport Avenue dam and hydroelectric facility. Any decision is still some time in the future as various unscientific polls favor the free-flowing option but not by a wide margin.

            SWIP (Surface Water Improvement Project): In February a newly-formed city council voted 4-3 to move ahead with a “dual source” drinking water system that would involve replacing 10 miles of aging transmission pipe that diverts runoff in the Tumalo Creek/Bridge Creek watershed,  and construction of a new treatment system.

            The proposal galvanized an unlikely opposition alliance that included established business interests and entrenched conservation groups. They argued the nearly $70 million proposal is too expensive as the city emerges from a deep recession and that continued creek/surface withdrawal could be detrimental to fish habitat.

            Although the city has already committed to purchasing $4 million of replacement pipe, the issue may not be settled as a federal judge has delayed construction while the city provides additional detail on the impacts and alternatives.

From previous posts:

Forest Serivce to consider environmental impacts of Bend water project

Report finds potential Bend water system savings

Bend approves contract for new water system
Bend water: where from and how much?

           

              

Beaver nation to expand in Bend? 4-Year OSU campus effort gaining strength

            The momentum is building to expand the Oregon State Universtiy-Cascades Campus to a full four-year institution with its own campus in Central Oregon and a potential student body of 5,000 by 2025.

            If successful, many community and business leaders say the expansion would dramatically enhance the region’s status as a diverse economic center extending beyond its current reputation as a tourism and retirement hub.

            As the effort intensified with private fund raising and support by the legislature and Gov. John Kitzhaber, OSU officials in early 2012 hired a Portland firm, SRG Partnership Inc., to assess requirements for classrooms, administration facilities, student housing, parking and other facilities. A report is due in April.

            OSU has also picked Compass Commercial, long-time Bend commercial brokerage, to work from the SRG needs analysis to target specific locations for the campus facilities.

            Compass is already the broker for seven properties within the City of Bend’s 1,500 acre Juniper Ridge project on the city’s northern boundary. Bend’s master plan for the project includes the possibility of a university campus in addition to research, business and residential uses.

            However, Compass and university officials have said the brokerage will be working from the guidelines established in SRG’s report to OSU officials. The university has already expanded some graduate programs into facilities along Columbia Street above the Old Mill District.

            An announcement by Compass noted that the company was selected after responses statewide to the university’s requests for proposals. The company said it “will utilize the results (of SRG’s work) to identify the optimal properties,” including those, “available and potentially available.”

            Currently OSU offers junior and senior level courses and some graduate instruction at facilities integrated within the Central Oregon Community College campus on the soutwestern slope of Awbrey Butte off Mt. Washington Drive.

             In his 2013-2015 biennial budget, Gov. Kitzhaber asked the legislature to approve $16 million for the OSU expansion, or two-thirds of the $24 million goal set by university officials.  Another $4 million would come from fund raising within the community and the university would match that with another $4 million.

            The community effort had yielded $2.9 million by late 2012 including a $1 million commitment from the Tykeson Family Charitable Trust, the family that

controls Bend Broadband, the region’s leading internet and cable corporation.

     There is also a separate $2 million endowment established by Mike and Carmen Cutting, 1965 OSU graduates. Earnings from that endowment could be used at the discretion of the OSU-Cascades vice president, who is now Becky Johnson, until the entire endowment is released from the Cuttings estate.

            As of early 2013, the OSU-Cascades enrollment was slightly more than 1,000 students. About 75% of those are juniors, seniors and graduate students with the remaining taking classes at COCC before entering the OSU programs.

           

            OSU Cascades/4 - Follow the progress for a 4-year university in Bend

           

City of Bend gets a taste of market challenges

            There may be a lesson to learn--or one of those “teaching moments”—in two City of Bend forays into real estate investment and development.

            Much like any private entity, the city has been whipsawed by the disastrous economy of the past few years and a dispute with original partners on, respectively, it’s investment in the former Bend Bulletin site near downtown and the 1,500 acre proposed Juniper Ridge mega-mixed use project on the northern end of town.

            On the one hand the Bulletin site might have appeared a good investment when the city paid the newspaper’s controlling corporation $2 million in late 2002 for the 3.17 acre site at 1526 NW Wall St. on the northern edge of the downtown business core.

            In 2009 the city listed the property for sale through Compass Commercial brokerage at $3.9 million, as the full impact of the economic slump reached through the Bend residential and commercial real estate market.

            Since then the asking price has been ratcheted downward to $3.5 million in 2010, and $2,278,406 in mid-2012 before going into expired status on the Multiple Listing Service of Central Oregon database in mid-February. All told the property has been on the MLS for 1166 days as of the expiration date.

            The listing information emphasizes that site zoning on the northeast corner of Wall and Olney allows for multi-story buildings up to 55 feet high. And, the listing notes, the “City is open for creative ideas, public/private partnerships & may be able to help with some attractive financing.”  

            Juniper Ridge has endured a more tortuous path since the city took ownership from Deschutes County at no cost with the conditions that it be used for a “public purpose” such as job creation, follow a master plan and include at least 10% of the land for parks and open space.

           At the start the city was faced with conflicting opinions from real estate brokers, neighboring residents and the Oregon Department of Transportation—among others. Brokers claimed there was potentially too much emphasis on residential at the expense of attracting industrial companies and building regional employment.

            Traffic impact issues, initally a major stumbling block, appear to have been resolved in negotiations with Oregon DOT.

            But the city ran headon into dispute with the original private development management group over ownership of the Juniper Ridge master plan that resulted in a $2.5 million payment by the city of to acquire it outright.

            As presented on the city’s web site Juniper Ridge should eventually evolve into a business, research, retail shopping and residential community that could also include a university.  As described in the master plan, it would be “a mixed-use, walkable environment that encourages alternatives to private auto use.”

There is increasing public and private support and momentum for expansion of the Oregon State University OSC/Cacades to a full four-year college. But  thus far Juniper Ridge doesn’t appear to be the leading candidate for the potential college location.

 


Seven lots totaling 23 acres are listed
 in Juniper Ridge

   

To date Juniper tenants are the headquarters of Les Schwab tire company, which moved from Prineville; Suterra, a biotechnology company: and PacifiCorp, which has plans for a service center.  

There have been suggestions the city should follow the lead of Prineville, which has attracted major data centers for Facebook and Apple. But a counter argument is that the centers consume larger sized lots and have high power demands without producing significant long-term employement.

 Compass Commercial listing information shows the brokerage has seven 1.5 to 9 acre parcels totaling 23 acres ready for construction within Juniper Ridge, all at approximately $7.00/ square foot or $305,000 an acre. The total listing price of all parcels is slightly more than $6.97 million.

Some commercial brokers say the market for industrial land has improved substantially in recent years, with vacancy rates cut in half from about 20% to 10%.

To date Bend has spent an estimated $18 million on Juniper for infrastructure and other costs, and assumed debt of about $10 million.  It has financed the debt with about $1 million annually in urban renewal tax funds and land sales have totaled nearly $10 million

 The Juniper Ridge Master Plan