The landmark Montgomery Park building in Northwest Portland changed hands for a $37.7 million credit bid Wednesday in a foreclosure auction.
In 2019, it sold for $255 million.
The bargain price points to the woeful state of Portland’s commercial real estate market. Not a single outside bidder submitted an offer Wednesday to buy the hulking office building in Northwest Portland. As a result, it will go to the lender, New York-based Natixis.
The auction was much anticipated as an indicator of the state of the office market in the city. A small group of about 20 braved the cold wind outside the Multnomah County Courthouse to watch in person. One onlooker brought a tub of popcorn which he shared with the crowd.
But there was no drama. The lone bid from Natixis was submitted in advance as a so-called credit bid.
Montgomery Park is Portland’s most high-profile building to go to foreclosure auction amid a bitter and ongoing crash of the office market in Portland and many other cities across the country.
The pandemic brought a profound change in the workplace as workers stayed home. The pandemic has eased, but many downtown offices remain sparsely occupied.
Combine stubbornly high vacancy rates with climbing interest rates and the deterioration of downtown, and some building owners haven’t the wherewithal to remain current on their mortgage.
“The commercial real estate market is suffering,” said Craig Russillo, the Portland attorney who served as trustee and ran the auction. “If values are down, occupancies are down and interest rates are up, that doesn’t bode well.”
That $37.7 million winning bid by Natixis equates to about $52 per square foot. By comparison, the office portion of the Broadway Tower in 2020 sold for $773 per square foot.
That’s not a totally fair comparison, noted James Childress, a broker at the Newmark Group Inc.
“That was at the peak of the market,” Childress said, adding that the Broadway Tower is situated in the heart of downtown and was fairly new at the time of its sale.
Natixis has hired Newmark to sell Montgomery Park. Newmark has yet to determine an asking price, Childress said.
The owner of the building was UPG Montgomery Park Property Owner LLC, a company affiliated with Unico Property Group. The Seattle based firm has a major presence in Portland, with stakes in downtown’s U.S. Bancorp Tower and several other properties.
A Unico spokesperson declined to comment.
Several other investment and financial firms owned a piece of Montgomery Park along with Unico.
UPG Montgomery Park Property Owner paid $255 million for the building in 2019, according to property documents. It defaulted on the debt last September, Russillo said.
At the time, UPG Montgomery Park owed about $126 million. Late fees and default interest pushed the total debt to $149.7 million.
The nine-story building is a familiar sight to Portlanders, with its massive sign visible from as far as the city’s east side. It boasts 756,000 square feet of office space, making it one of the largest office buildings in Portland.
The structure, originally a Montgomery Ward warehouse, dates to 1921.
-- Jeff Manning covers business news. Reach him at jmanning@oregonian.com.