As commercial property values decline due to lower occupancies in some downtown areas, companies are taking steps to contest the property valuations calculated in their counties. Seattle-based Unico Properties, which is a major landlord in the city and owns eighteen properties in Portland, is engaging in such actions, seeking a reduction in its tax bill for two buildings it owns in the city. Moreover, public records from Multnomah County indicate that the property owner is facing a lien on another property.
According to a report in the Portland Business Journal, earlier this year, Unico filed two cases in the Oregon tax court to address financial pressures related to its properties in downtown Portland. In May, the company filed appeals for the RiverTec building located at 926 NW 13th Ave. and the Lovejoy building located at 1331 NW Lovejoy St. in the city’s Pearl District. Unico aims to reduce the valuation of the RiverTec building from $39.2 million to $14 million and seeks a valuation of $22 million for the Lovejoy building, down from the current $35.5 million.
Unico is basing its argument on the severe impact of the market downturn and low office occupancy has had on commercial property values in the city. Despite paying taxes on both properties, the company’s appeals to the Multnomah County Board of Property Tax Appeals were rejected, prompting Unico to file the lawsuits.
Leasing activity in downtown Portland has been historically low. According to a second-quarter 2023 Portland Office Market Report by brokerage firm Kidder Mathews, leasing activity continued to decline, reaching a near-record low of 639,000 square feet, a 33 percent year-over-year decrease. The report states that this figure was only surpassed once, in the third quarter of 2020, at the beginning of the COVID-19 pandemic, when leasing activity reached only 548,000 square feet.
Conversely, sublease availability has consistently reached record highs since the start of the pandemic, with the second quarter reaching an all-time high of approximately 17.6 million square feet. The Portland office market is expected to remain slow throughout the year, facing challenges such as changing square footage requirements and businesses breaking leases to return office space, according to Kidder Mathews.
In addition to the tax court battles affected by market conditions in downtown Portland, Unico is dealing with a dispute related to another property it owns in the city, Montgomery Park. Turner Construction filed a construction lien against Montgomery Park for $2.1 million in unpaid building improvements, as reported by the Portland Business Journal. Unico had awarded Turner two project contracts for Montgomery Park in 2022, with one valued at around $90 million for building repositioning and the other for $2.5 million, titled “Adidas Landlord Delivery Improvements,” the report stated.
Industry reports show that Unico and Partners Group acquired Montgomery Park in 2019 for $255 million, and the latest property records indicate its real market value is now just over $187 million.
