PSU withdraws offer to buy North Macadam blocks

On advice from insiders at the state legislature, Portland State University has withdrawn its offer to buy two blocks on S.W. Macadam Avenue, but the university hasn’t given up on establishing a presence in the area.

“The university is not moving forward on it,” said Jay Kenton, vice president for Finance and Administration, speaking of the specific offer. “I have had conversations with the PSU Foundation about being interested in purchasing it and leasing it to the university.”

PSU wanted to eventually clear the property in the heart of the North Macadam redevelopment area and build a high-rise multi-use structure. That construction would have waited, however, for completion of the new engineering tower on the Fourth Avenue Building.

“It’s right in the middle of the North Macadam redevelopment district,” Kenton said of the coveted blocks.

The parcel consists of properties at 3714 and 3885 S.W. Macadam, not far from where Oregon Health and Sciences University owns 28 acres. The Old Spaghetti Factory is in the near neighborhood on S.W. Bancroft.

The Portland Streetcar is proposed to extend down the middle of S.W. Moody, which abuts the desired PSU purchase. The proposed OHSU tram also would locate nearby.

The property slopes from Macadam down toward the Willamette River. Presently there is a warehouse, which covers nearly one block. There is an old gas station on an elevated concrete slab that is currently being used as a retail boat showroom.

All the property is leased or potentially leased. The estimated lease income minus debt service would have given the university only about a $6,000 negative cash flow annually while the property awaited redevelopment.

The offer to buy was withdrawn after resistance to the purchase appeared at the state legislative finance office. One of the leaders of the state emergency board suggested the request to purchase be deferred. It was then withdrawn.

Kenton said engineering was very interested in using some of the tract for materials science research and geotech research. He said engineering has a need for “dirty space” where it may study drive shafts from nuclear submarines and test metal fatigue. Geotech people need a site where they can study dump truck loads of dirt and other kinds of aggregate.

“Ultimately, this would have been land that we would have cleared and built a high rise – classrooms, laboratory, office and parking complex,” Kenton said. The parcel represents a prime piece of real estate in the North Macadam redevelopment area, in his opinion. It is in the middle of what OHSU and private developers hope to redevelop.

Kenton also saw the property as a potential bargain. At a price of $3 million, the 93,000 square foot, or 2.1 acre, plot of land pencils out to about $33 a square foot. The university is paying $100 to $150 a square foot for land in the close-in campus area.

“Secondly, height limitations in the University District are 125 feet,” he said. “On North Macadam they are 225 feet. So not only are you getting cheaper dirt, but you have the potential to build nearly twice the height structure on that dirt.

“The legislature thought it was a time when we should be retrenching. They didn’t understand why we wanted to buy property in this location.”

PSU set its sights on North Macadam some time ago. Kenton characterized locating there as helping create an element of a “research triangle” of OHSU, PSU downtown and PSU in North Macadam.

Kenton is working with Burt Ewart, PSU Architectural Consultant, on expanding the University District boundaries down to where they touch Macadam. They will be working with neighborhood groups, student groups and others in the area.

“We’re running out of land in the 52 blocks that we currently define as the University District,” he said. “Most of our growth will be to the east and south. Just to reflect the realities of a growing institution we need to expand its boundaries.”

The university has established a policy of support for the OHSU proposed tram to the North Macadam area. Last June PSU issued a policy statement that identified the campuses of OHSU and PSU as anchors for a Science and Technology Quarter. It called the tramway and the streetcar extension essential to the quarter’s success and effective collaboration between the two institutions. The policy saw North Macadam as a location that will enable PSU and OHSU to manage their growth. PSU is estimated to reach 35,000 students in the next 10 years.