Wow, nice return on investment

Ryan Frank, in today’s Oregonian, reports:

“A Denver-based developer will build a 270-apartment project among South Waterfront’s towering condos, another signal that Portland’s robust rental market and sluggish condo sales are starting to reshape the city’s housing mix.

Simpson Housing last week paid about $8 million to buy Block 46 from South Waterfront’s lead developers, North Macadam Investors, said Homer Williams, who leads the North Macadam team.”

Block 46, that rings a bell…. Google, you are such a help. As are Portland citizens Jack Bogdanski and Jim Karlock, both excellent sources for picky details. From a comment on Jack Bog’s blog, May 17, 2006, Jim posted the following copy from the Oregonian:

“Developer Homer Williams is the driving force behind South Waterfront. In July 2005, his firm North Macadam Investors bought two blocks of bare land south of the condominium towers rising from the ground today. Pacific N.W. Properties sold the parcels, known as Block 46 and Block 49, for $3.1 million.

Nine months later, as part of the latest funding deal, the PDC agreed to pay $5 million for Block 49 — about 40 percent of the total parcels, county property records show. The PDC also will clean up petroleum contamination, which it estimates could cost $100,000. Further, the city has agreed to make Williams’ company the developer of the affordable housing envisioned at the site rather than open the project to competitive bids.
The Oregonian, Sunday, May 14, 2006 RYAN FRANK and JEFF MANNING”

Nice, huh? Buy two parcels for $3.1m. Sell one to the Portland Development Commission after nine months, for $5m. Sell the other two years later for $8m.

Gross return on investment: $9.9 million in two years, without building anything.

When I was on the Portland Planning Commission, I questioned the 10% profit margin built in to tax abatement proposals. At the time, Steve and I were getting less than 3% interest on our savings. “Why does the City guarantee such a high rate of return in times like this?”, I asked. One of the developers on the Commission responded, “Well, when you have millions of dollars to invest, you’ll be able to expect that kind of interest, too.”

And that’s how the rich get richer.