If you’ve seen an amazing historic building in Portland, chances are Craig Kelly something to do with it. Since 1994, Craig has worked to restore beautiful buildings like the White Stag building that Needmore occupies! He drops by to tell us how he got there, what’s next, and why it all matters.

Show Notes

Recorded Tuesday, September 24th, 2013, and this is episode number 30. Follow Ray, Kandace, Dan, or Needmore on Twitter. Please rate our show on iTunes!

The Interview

Ray:
Hi, Craig.
Craig:
Hey, Ray. How are you?
I’m good. Are you from Portland?
I was born and raised here in Portland.
In the city, or…?
Mid County, Southeast Portland. I graduated from David Douglas.
Okay. Did you travel a lot, do an on the road thing, or did you stay here?
I stayed here, but I traveled a little bit when I was in college. I’ve traveled extensively since I’ve become a grownup.
Yeah, cool. Did you go to school for the kind of thing you do or…?

A real estate professor took me aside and said, “What do you want to do when you grow up?” and I said, “Gee, I don’t know, maybe go be an appraiser or something.” He told me, “No, you’ve got too much ambition, drive. You should go make the market, not report the market.”

No. My family always liked real estate per se. We had a few little rental houses here and there, and as I grew up my dad would fix them up and we’d sell them for a couple of bucks and what have you. I was studying economics at Portland State, and my dad had a berry farm in Gresham. He decided he was going to be this big-time developer when the Persimmon golf course in Gresham was being built, because we owned the berry farm across the street. I was taking real estate appraisal classes and things like that.

Subsequently the early ’80s came and the market went down the bath, down the toilet. My dad said, “I’m done,” and got out, and decided to work to for somebody else. He actually worked for Susan Kaspar and I was on my own. A real estate professor took me aside and said, “What do you want to do when you grow up?” and I said, “Gee, I don’t know, maybe go be an appraiser or something.” He told me, “No, you’ve got too much ambition, drive. You should go make the market, not report the market.”

Interesting. How has Portland’s real estate market changed since then, since it was down the toilet in the ’80s?
Well, it’s night and day.
Has it slowly come back or did you feel like there was a moment where you realized it was turning around?
It’s kind of ebbed and flowed. The whole cost of housing has … it’s still mind-numbing to me. The appreciation of housing and the cost has changed. When I first got into business, I was selling apartment buildings is how I got involved, and older properties, and how my business partner Art and I met, in the Northwest. We were bringing in these guys from the San Francisco Bay Area who were buying up a bunch of apartment buildings and seeing how that, “Gee, for 25,000 a door…”

There were over 100 in San Francisco at the time, and they started doing condo conversions and things of this nature. That’s just one aspect. I remember when the Pearl District was just kind of getting started and Chown Pella, they were trying to get $200 a foot for their condos. I thought, “Oh my god, that won’t ever happen,” and of course what do I know, right?

Yeah, it worked.
But no, the market is very good today and it’s better. The urbanization of the city is for real. It’s the real thing. You have a lot of in migration, both young and old, and the demand is there. You see all these building permits for urban projects. You’ve got as bad or worse of a commute coming in to the city at 5:00 than leaving, like the old days, the suburbs, because you’ve got all these guys at Nike, Intel, who want to live here in the city. I mean look at all these great restaurants and retail opportunities we have, the Northwest 23rd’s of the world that weren’t there 15 or 20 years ago, they were just thought of.
At Venerable, you’re kind of known for working with Stark properties.
Yes.
In a city that’s busy growing and filling in all these spaces, why does it matter? Sorry about that. We’re losing our lights. It’s my personality. Sorry.
Well, Portland is blessed that we have a very large historic fabric for a small city, big town, small city. We have disproportionate amount. We have a very large historic district here in Skidmore Old Town, as an instance, and a very good historic per se—for Portland’s standard, historic housing stock like Irvington, Ladd’s Addition, Northwest Portland, et cetera.

My business partner Art, he started Venerable and I joined him soon thereafter. We just went after that narrow niche. I don’t think either one of us thought we would be as large as successful as we’ve become. We’ve been very fortunate and blessed to be in the right place at the right time. We’re very proud of the work that we’ve done and are continuing to do. We are blessed to be in … we’re in the White Stag building here, and we’re happy to have you.

We’ve got a pretty good eye… Art and I are pretty demanding, we know what we want. Part of the reason why we’re called Venerable is we want to create venerable projects. We want projects that last beyond Craig and Art, and that our grandchildren could be proud of. That, “Gee, Grandpa had something to do with that building.” We tried to do things that are more timeless and not flavor of the month. Right or wrong, but that’s how we like to try and do things. We want to try and honor the history and its past of these buildings, but we want to modernize them enough to keep them going for the next 100 years.

Tell me what the story is behind this building. What was it like when you found it? How did you put this together?
This building was owned by the Naito Family for decades before we acquired it seven, eight years ago from them. It was kind of benign neglect. They and probably the previous owners before them, and that’s the case in lot of these historic buildings, they just don’t … people don’t do anything to them, and or they don’t know how to do it or the cost is so prohibitive to renovate them and take them to this different level.

When we came into this building and this particular building that your office is in called the Bickel Building, because White Stag is three historic buildings that have been combined into one, there was an unbelievable amount of storage. The Naito Family owned Made in Oregon as well as a company called Norcrest China, and it was stuffed to the gills with boxes and boxes of kitschy little knickknack kind of stuff that you find on your grandmother’s end tables and stuff.

They took … I can’t tell you, I have it somewhere, but I mean countless 40-yard dumpsters of stuff out of here. So much so that the floors on this floor and the third floor below have actually raised above the beams because there had been so many years of stuff stacked on the beams. The beams had kind of done this slight little concave that when stuff was lifted off the floor you could kind of bounce on the floor like a quarter inch or something. It was kind of freaky. We’ve subsequently fixed that.

I’m sure. I’ll take your word for that.
Yeah.
How do you put … The interior of this building has a lot—and a little bit of personal story, when we were looking for a place downtown we looked at a lot of places. A lot of them probably had just as much history as this building, but were completely forgettable on the inside. It was just a white corridor and you could barely find any exposed brick or anyone bothering to make a window that you could even open. There was nothing remarkable about them. This was the first place we looked at, and it made it impossible to look at anywhere else. It kind of ruined me, because I remembered seeing the exposed brick and the way that you’d used the materials and stuff. How do you pull that off?
We’ve got a pretty good eye for this sort of thing. Art and I are pretty demanding, we know what we want. Part of the reason why we’re called Venerable is we want to create venerable projects. We want projects that last beyond Craig and Art, and that our grandchildren could be proud of. That, “Gee, Grandpa had something to do with that building.” We tried to do things that are more timeless and not flavor of the month. Right or wrong, but that’s how we like to try and do things. We want to try and honor the history and its past of these buildings, but we want to modernize them enough to keep them going for the next 100 years.

We’re a big fans of natural day lighting, so we want to keep the day lighting exposed. Where we can expose brick, we’ll expose the brick, and the exposed timbers and things of this nature. Which generally speaking, the market today wants it. But5, 10, 20, 50 years from now people will be putting in false ceilings again, or shag carpet, or god knows what, because that market kind of ebbs and flows. We’re in the market now where people want more tangible, back to nature, more real. They want the higher ceilings, they want operable windows, and so that’s what we’re trying to deliver.

You did this in partnership with the University of Oregon, is that right?
The University of Oregon is strictly our tenant. We had worked with them on another property that didn’t work out. Then I subsequently had contacted the Naito Family. They were pretty far down the road with another party to actually sell the property, but we convinced them to change horses at kind of the last minute.

I think they would be very happy with what’s transpired. I think we’ve improved the building more than anyone expected. As a result, we’ve achieved pretty good rent and I think helped instigate additional changes in this neighborhood. For instance, I don’t know if College of Natural Medicine or MercyCorps would be located across the street from us if we weren’t here. White Stag has … I mean Old Town, again I’m from here so there’s … for many years, you would never go to Old Town. You just didn’t go there. You especially wouldn’t let your grandma or mom go there.

Now, I don’t think twice about it. I think we’re a small part of that solution. I’m proud of it. We love the University of Oregon becoming a partner per se, or tenant in the building, because they bring a lot of energy and vitality to it. They’ve had thousands and thousands of events here that have brought countless people into the building and for that matter the neighborhood, just so people can say, “Wow, it is safe. I’m not going to get panhandled on every corner by…” et cetera.

Bickel Block Building

Bickel Block lobby, before and after the renovation
Photo credit: Venerable Properties, LLC


It’s a process. When you say you had some success, have you had some failures or some lessons learned along the way?
We certainly have had lots of lessons. Every project has lots of lessons. Art and I have been very, very fortunate in that we really have had not any financial failures. We had one project in the Southeast that we ended up just barely making a little money on. We didn’t lose money, so we view that as a success, but that was part of the function of the market. We had a partner in it that wasn’t fully committed to what we wanted to do to the building and the timing, and then it kind of stalled. You could make some arguments that the location wasn’t as good as maybe we should have, but I think it would have worked out. You know, c’est la vie.
Can you talk about any projects that you’re working on right now?
Yeah, our biggest project that we’re going to work that’s going to be in the press very shortly is Washington High School, which is on the corner of Southeast 14th and Stark. We’ll be buying that property at the end of October of 2013, and starting construction immediately. That’s very similar to White Stag in that it’s about 116,000 feet. White Stag is 137,000 feet. I think it’s going to be one of these big events in that neighborhood that takes it to a different level.

That’s a really nice area that has … I don’t think—it’s not been forgotten but hasn’t been given enough credit. I think with Washington High School being redeveloped, people are going to “discover” it again even though this building has been there for 90 years. It’s a beautiful old concrete building that’s got a brick veneer, four stories tall. We’ll have about 20,000 feet of ground floor retail or service office and another 70,000 feet of office on the upper floors, with a five to 600 feet auditorium which we’ll rent out for events. We’ll also have 150 to 200 person rooftop deck for event space as well, along with as a building amenity for the tenants.

The beautiful part about that building is it’s got the most incredible views of downtown Portland. Most of the time you see, if you’re in the downtown you’re looking at … here, you’re looking at the whole thing.

It’s almost like a little kind of hill that it’s on there.
Absolutely.
It’s right off Stark, right?
Yeah, it’s on the corner of 14th and Stark. I think people are surprised that that… It is modest but there is a real elevation change between downtown and that building, so it has a tremendous panoramic view.
It’s right by Nostrana. They’ll love that.
Nostrana, and I think there is going to be a lot more retailers and foodies in that location, including our building.
Yeah. When you look at a project like that, can you look ahead to a day when you’ll be open for business or is it just really hard to guess far ahead?
We absolutely on our first walkthrough can see it a lot of times, or see some of it. That pile of mine on that project starts in 2009. It takes a long time, some longer than others, this one particularly long to see it. It has changed over time. We put a lot of effort in the first couple of years and turned that into housing. The fact of the matter is it doesn’t work financially, so we changed gears to figure out what would work financially and this is the direction we’re going now. We’re going to start construction let’s say November 1, and we’ll be open for business and occupancy about 11 months later.
At some point I think referring to that project you had said something about the housing, that that consideration about that was a preservation thing?
The current zoning was housing focused. The neighborhood, who had a lot of interest and concern about that building for decades, wanted housing in the project. We really tried hard to figure out how to make housing work, but the problem with the building is it’s an old high school.

If you wanted … Art and I are a little more preservationist versus adaptive reuse. I mean there are some people who would gut it from the inside out and just maybe leave the exterior skin and go on in its merry way. We wanted to preserve as much of the interior as well as the exterior. The fact to the matter is the building is 116,000 feet but you only have about 75,000 feet of rentable space, because you’ve got this big auditorium in the center and you have 14 to 18 foot wide hallways with lockers. I mean it’s an old school, and we want to keep them.

If you’re only able to rent or sell, give or take, half of the building, but you’ve got to renovate a whole building, you got to be able to get enough rent and or revenue to pay for it. In that regard housing didn’t work.

Where do you feel like you picked up your skills at making deals?
I don’t know, but…
Because I hear you’re okay at it.
Yeah, I guess I’m just an Irish guy that’s got the gift of gab. My mother and grandmother, I got a lot of their skills probably. When I was a kid I could, from Y Indian guides, Cub Scouts, Boy Scouts, the whole Maryann, I was always one of the top popcorn salesmen, or selling candy or whatever else I was doing. I don’t know, I just always was able to do it. It’s just something that comes naturally.
Do you think that’s something that helps when … you were saying the market might value historic properties differently. Do you think you have a special skill at explaining the value of a historic building to people?
Maybe, or I just reach some kind of connection with certain people. There’s always people who you don’t connect with, but I think people who have an interest in leasing historic properties for instance probably have some of the similar interest and or concerns that I who develop historic properties have.

For instance, a lot of people are very environmentally conscious in today’s world. I didn’t want to save the trees per se, and my way of saving the trees is to save these old buildings. In essence that’s just one thing that we’re doing. I view saving all these old historic old buildings as one of the most green things anyone can do, because you got all this embodied energy already in these properties and they’ve already been built, and frankly they’re as good or better than anybody can build today. Let’s just take advantage of what we all ready got.

This building is very energy efficient but also LEED compliant. Do you think that is kind of part and parcel of the whole…?
Yeah, I mean there are certain firms that gain a lot of value on being in a LEED Gold building like White Stag. A lot of government agencies are required to be in that. The fact of the matter is in today’s modern building’s codes, it’s almost a LEED building, LEED like, maybe LEED light, already. You have to do this cost benefit analysis of is it worth spending another million dollars to get these seven expert LEED points so you can get your glass plaque on the wall that says, “Yeah, you’re LEED”?

You have to go through that process. We did do that at the Washington High School, and we’ve chosen it’s not worth it. We can’t figure out a way to … even though we’re doing all these business building control systems that are very LEED like, I just have to make a call. I needed these buildings to pencil financially so I can keep doing them in the future.

As someone who does the type of development work that you do and business that you do, are you also kind of fascinated with history. Do you know a lot of Portland history?
I do know a lot of Portland history. I am actually quite a history buff. My children really don’t like traveling with me because they call me “Mr. Sign Reader” because I read all the signs. They take photos of me throughout our travels looking at signs. No, but I actually know a lot about it and I enjoy it a lot. In fact, a lot of the things that I do read are more autobiographical on historical figures or events.
Have you by random chance been to Minneapolis in the last five years?
I’ve never been to Minneapolis, other than through the airport.
They are doing some remarkable historical work on the river there.
That’s my understanding. As a matter of fact, we met one of the fellows who did one of those flour mills. His name is not off the top of my head, but we talked to him in great detail when we were pursuing the Centennial Mill project. We brought Tom, I can’t think of his last name for the life of me, out to Portland. Subsequently, I think Jordan Schnitzer, who is now leading the charge on the Centennial Mill project, still has him on their consulting contract. So yeah, they’ve done a lot of really cool adaptive reuse projects.
One of the more interesting stories, and I don’t know how true this is or where I heard it, but was that a lot of reasons that those neighborhoods like Ladd’s and stuff, those were people who ran the railcar lines through downtown at one point and that they wanted to give people a destination to go across the river.
It wouldn’t surprise me. William Ladd and some of the founding fathers, for lack of a better term, of Portland, they had all this foresight but they also … they weren’t doing it for complete generosity either.
Not pure altruism?
No, yes. I think there was some other incentives there along the way.
I just find it so interesting, when you see all the historical photos of Portland they all have rail lines. That was so common in…
Streetcars.
Yeah, streetcars. Now it seems like that it is kind of coming back.

Trolley map

1943 Trolley Map of Portland, including the Street Car line in yellow


Well, they’re still trying it. I remember in a meeting with Sam Adams long ago, he was running the transportation department, that he wanted to basically restore most of the street cars to where the old street cars line were: Belmont, Stanley Boulevard as examples. I don’t know if it will or won’t, but if the density continues it might. Statistically, studies have shown … and this is Homer Williams and guys like that will attest to this, that higher density folks and especially the upper socioeconomic, they prefer streetcars to buses. The ridership, et cetera, will be higher, and that’s what will help drive the density. Whereas you’re not going to get the same with more bus service.

My recollection is that was one of the requirements to get that streetcar out into the Pearl District. Now we know it’s there. Then they punched it out to Waterfront, South Waterfront, and now we know it is there. Part of the reason why the city of Lake Oswego wanted to do streetcar down that old line to change that whole area of the Foothills neighborhood along the river was to get that kind of urban density, but some of the folks in between and or in Lake Oswego kind of like it the way it is. I don’t know what will happen there.

You mentioned that you like to read non-fiction. Is there or something that you read recently?
I don’t read a whole lot. I am from the Southeast after all (laughs). No, I’ve read a couple of … like Doris Kearns Goodwin’s on … her latest—not latest, but “Team of Rivals,” that talks about Lincoln and his cabinet.
Did you finish that one?
I did. It was terrific. Then I am just about to finish with another book, “How the Irish saved Civilization,” which is a short read but it’s interesting. Talking about Saint Augustine and Patrick, and their roles in saving Western Civilization from the Barbarians as Rome fell.
Okay, interesting. I have not heard of that. Do you have a current favorite restaurant or anything like that in Portland?
No, I…
That is a tough question because Portland is exploding, especially with Feast just happening.
Well, you know, just that’s it. I love some of the food carts out there. I like going to my local Vietnamese pho place. My sweetheart and I, we like to come downtown here and there. We’re just blessed to be in Portland where we have such a great variety. “Well gee, what do you feel like?” and you just go there versus having to deal with … like my family in Phoenix who has nothing but chain restaurants to deal with. We prefer to go to more independent owned restaurants.
Yeah, I mean we were just down in San Francisco this last weekend. It used to be I used to love to go there just for the density of places to go for food. We went there this past weekend and I was like, “You know, Portland is catching up pretty quickly for an amazing restaurants you can walk to.”

My sweetheart and I, we like to come downtown here and there. We’re just blessed to be in Portland where we have such a great variety. “Well gee, what do you feel like?” and you just go there versus having to deal with… nothing but chain restaurants… We prefer to go to more independent owned restaurants.

Absolutely.
Especially down here. It’s just so nice. Just, “Where are we going to go for lunch today?”
Yeah. There’s certainly … you get into your habits in your two or three block radius, but if you’re willing to drive five minutes the world is your oyster and not just Dan & Louis’.
Great, well. Thank you so much for your time, Craig.
Thanks, Ray. You take care. Glad to have you.