Harsch gets predevelopment loan for Centennial Mills
May 5, 2013
By Allan Classen

The Portland Development Commission was promised a legacy project backed by lots of passion last month, but few particulars on how Centennial Mills will be redeveloped or answers to disturbing questions that linger over the site have been addressed. The commission unanimously approved a pre-development loan of $350,000 to Harsch Investment Properties, whose president Jordan Schnitzer gave broad assurances that seemed to satisfy the commission.
Commissioner Aneshka Dickson called Schnitzer’s answers “fantastic” and revealing of his “complete passion for the project. “I’d lost my passion for the project,” she confessed, “and you’ve definitely restored that. Your careful, crafted answers show you’re the right person for the project.”

Dickson was not the only person whose enthusiasm had waned regarding the long delayed redevelopment plans. PDC recently revealed that it has spent about $700,000 on an earlier proposal by California developer LAB Holding LLC that ended in recriminations and a lawsuit. But the rugged history and doubtful feasibility of the latest redevelopment effort were washed away by a flood of hopeful emotion at the April 9 commission meeting.

“I really love the passion you have for this project,” said PDC Chairman Scott Andrews. In case anyone missed the point, Pearl District Neighborhood Association President Patricia Gardner took her three minutes of public testimony time to prod the commission to “remain passionate. “I have no doubt Harsch will find the answers,” said Gardner. “They have the strong support of the community.” She cajoled commissioners to “find determination and echo his passion.

“I know you’re jaded on this project, and it came through loud and clear,” she said. “Remember this passion if you can, because we’re all going to need that.” More than optimism may be needed to surmount stark assessments of the project’s potential. Commission member Steven Strauss warned that some of the buildings may have to be razed or only their facades retained. He compared it to projects along San Francisco’s wharf, which were far more expensive than anticipated. “How do we avoid cost overruns?” asked Strauss, who did not vote on the motion due to a potential conflict of interest.

PDC selected a joint venture of Harsch and Venerable Properties to redevelop the site in 2012, but Venerable President Art DeMuro died last September and his company dropped out. The pair teamed up for the original competition won by LAB Holding LLC in 2008, but failed to make the final round of three. Only two parties bid for the project in 2011 after the deal with LAB blew up. The delays have undermined one of the primary goals of the 2006 Centennial Mills Framework Plan: historic preservation.

“Art and I were pretty confident we could save most of the buildings,” Schnitzer said of his position in 2008. However, when he inspected the structures last fall, “We were chagrined and disappointed by the deterioration that has taken place.”
Calling it a “legacy project,” he said 50 years from now tens of thousands of people who come here won’t remember who built it, but they will be grateful that someone did. To create such a project, Schnitzer said public money will be needed. “The more we want to preserve for the public good, the greater cost there’s going to be,” he told the commission. “There must be a public investment for the public good.” Plans include 229,000 square feet of space—divided among industrial, retail, art space and residential—the same figures as in the Venerable-Harsch joint venture. The only difference is that 36,000 square feet of retail has been targeted to arts-related tenants.
Later in the month, Schnitzer responded to the Northwest Examiner quest for more specifics.

How is this proposal different from the joint venture with Venerable Properties?

“At the present time, it’s not much different from what Art and I worked on together,” said Schnitzer, noting that changes will be made as it moves forward. “Right now, it’s basically the same proposal.”
Why are you projecting a predevelopment expense of $700,000— half of it coming from PDC—when DeMuro calculated only $350,000 for pre-development and suggested that perhaps all of it would be covered by the developer?

“I had my team go over it line item by line item,” he said, explaining that he consulted with architects, engineers and other experts to assemble hard and realistic numbers. “That’s how we came up with that.”

Are you taking advantage of feasibility studies and work done for this site in the past five years? I understand PDC commissioned an engineering analysis of the piers in conjunction with the LAB proposal.

“We have all that information now, including LAB’s information,” he said, “but I don’t know about the piers.”

What kind of arts tenants are you contemplating? Will these be offices of arts organizations or performance or exhibit spaces?

“I don’t know in particular,” he said. He believes, however, that some of the underground spaces may be ideal for ballet classes that need high ceilings but not windows. He’s on the board of the Circus Project, which works with at-risk youth, and it needs 18-foot ceilings. Pacific Northwest College of Art needs a space with heavy concrete floors for a contemplated glassblowing shop.
Is it fair to say you told PDC that additional public subsidy will be needed if the project is to produce a public benefit?

Schnitzer said he would put it the other way around: the only way to justify public investment in the project is if there is a public benefit. “There are some spaces that will be hard to use commercially. It’s tough enough to build an apartment project or a commercial project or a retail project and make the numbers work. Add in a hyper-complicated site, and it adds to the uncertainty,” he said. “We have an obligation to create as much revenue from the parts of the project that are more economic to subsidize the less economic parts. Some spaces below ground won’t work commercially, but at the same time, they may make fabulous community spaces.”

How important is the proposed pedestrian bridge from The Fields park to Centennial Mills?

“I’ve always felt that the connection was an important part of the project,” he said. “It may even be critical.” Nevertheless, he considered it one of several objectives that “may be on a collision course.” “How do you weigh restoring all of the buildings versus the bridge versus the greenway?” he asked. “They have to be weighed on a cost-benefit standpoint.”

How much do you envision investing in this project?

“I estimate the total project at about $35-$50 million,” he said, “but those figures are just pulled out of the air.”

How should this project be judged?

“The key to this project is being a success in 50 years. Citizens of these communities won’t remember Jordan Schnitzer, but when they go to the site, if they are still amazed and excited and find it a wonderful place to be, that’s the standard by which we are looking at this project.”