Brewery Blocks move to Wall Street

Gerding Edlen Development Co. recently proved again that green real estate often comes at a premium. On July 24, the Portland-based development company sold three buildings in its acclaimed Brewery Blocks to JPMorgan Asset Management, a division of JPMorgan Chase & Co. (NYSE: JPM), for $291.6 million. Seventeen out of nearly 70 interested buyers reportedly submitted formal bids for the buildings, which ultimately set a Portland record for per-foot and per-unit price.

The Brewery Blocks, the urban redevelopment that put Gerding Edlen on the map, includes six blocks of mixed-use office, retail and residential buildings, as well as underground parking. The record-setting JPMorgan deal included Block 1, housing Whole Foods Market (Nasdaq: WFMI); Block 4, housing M Financial Plaza; and Block 5, containing The Louisa apartments. The three buildings, totaling 660,000 square feet, were all built according to the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) rating system [see “One building block at a time,” Sustainable Industries, March 2007).

Gerding Edlen purchased the decrepit Brewery Blocks from Stroh Brewing Co. in 1999 for $19.5 million. Founding principal Mark Edlen says it was time to pay back the eight Portland investors that took a risk on the urban infill project.

“When we started construction, doing urban mixed use, historic, sustainable, pedestrianoriented, transit-oriented development was not the favorite product type by any stretch of the imagination,” Edlen says. “We wanted to use this as a demonstration project for sustainability. I think we accomplished everything we tried to. I hated selling it. I have very mixed emotions.” Gerding Edlen has more LEED-certified projects than any other developer in the country. Of the properties included in its recent sale, Block 2, Block 4 and The Louisa are certified LEED Gold, while Block 1 is certified LEED Silver.

Gerding Edlen maintains ownership of the retail spaces at The Henry condominiums, which is certified LEED Gold. The Gerding Theater at the Armory, which was the first historic building to receive LEED Platinum certification, is owned by Portland Center Stage. And Block 2, which holds a 10-story Class A office building with ground floor retail and three levels of underground parking, was sold to Multi-Employer Property Trust in 2001. Also known as the brewhouse block, it is certified LEED Gold.

The city of Portland provided a $1 million grant to install streetlamps and benches in the Brewery Blocks, which is now a hub of activity near Portland’s city center. The Portland Development Commission provided a $6 million loan that was used to create 400 public parking spaces. The loan is already paid off, according to Edlen.

While the sale was bittersweet for Edlen, he says it was the right time. “The capital markets were such that the demand for this type of product was very high, and thus the pricing opportunity was very strong,” he says. “And the product had matured to a point of stabilization, so if there was going to be a time to change, this was the time to do it.”

The number of Gerding Edlen employees has more than doubled since 1999, and the company has expanded to Los Angeles and Seattle. The company’s co-founder, Bob Gerding retired in 2006.

With a number of projects underway or in the pipeline, Gerding Edlen says it is trying to raise the high bar it’s set for green buildings in Portland. “Our objective in the next four to five years is to figure out how to develop buildings that produce more energy than they consume and consume more trash than they produce,” Edlen says. In light of climate change, loss of biodiversity and environmental degradation due to urban sprawl, Edlen says, “We cannot move fast enough. It’s all about scale and speed.”