In the rough

Economic downturn stalls Cedar Links owners in Medford and other local developers
Though the property on which the Cedar Links Golf Club sits is in foreclosure, the owners have submitted updated plans to the city for development.Mail Tribune / Jamie Lusch

East Medford is checkered with lamentable reminders of failed or truncated projects crushed by the weight of the real estate bubble that burst.

The collapse, which followed a heady run-up that ranked Jackson County property values among the nation's fastest growing, cost hundreds of people their homes, robbed investors and speculators of millions of dollars and put regional banks in regulatory hot water.

"When developments go nowhere, it all becomes a waste of time and effort, whether it's economics or a dream," said Carlos Reichenshammer, chief executive officer for the Home Builders Association of Jackson County Inc.

A dearth of residential building and tumbling property values have threatened Cedar Landing, a 114-acre planned unit development on both sides of Cedar Links Drive that gained approval in 2006 after years of work.

County records show Cedar Links Golf Club owners Monty and Theresa Jantzer first missed payment on their $2.2 million loan from PremierWest Bank on Sept. 15, 2010, and they went into default on April 25. The total default is $4.4 million.

After selling 5 acres to the city of Medford along the north side of Cedar Links Drive for a park, Jantzer submitted updated plans to the city.

He's still hoping to move forward with the project.

"We have a very viable PUD with one of the better layouts in the valley," Jantzer said. "When things pick up, we're ready to go. We're looking for refinancing sources and exploring different avenues."

Whether the planned unit development is rescued or goes to auction in September is yet to be seen.

Multiple projects have died in the past five years, and it will be a long time before financial realities open the door to more such developments. The irony is that the people desperately in need of the jobs resulting from such projects remain idled.

"It's a multipronged problem," Reichenshammer said. "On one hand you miss the opportunity to create jobs, especially a development like Bella Vista (off East McAndrews Road), which was a pretty good-sized project. There were thousands of dollars spent and many months on a specific project on the part of developers as well as the city planners."

Alex Pawlowski, a former LibertyBank executive and now the business loan development manager for Southern Oregon Regional Economic Development Inc., said there is no turnaround on the horizon.

"We've been living in uncertainty for four years, almost to where it has become the new norm," Pawlowski said. "It makes things that much more difficult."

Banks, he said, are held accountable by regulators who now more than ever are scrutinizing the collateral behind loans. When the value of property declines, the borrower has to pay down the loan to keep within the regulatory guidelines or find alternatives.

"If you are waiting for the real estate market to rebound, it will be a long wait," Pawlowski said. "When the bottom falls out, the only way for the bank to maintain its position is to ask the borrower to pay more of the loan down. How can they do that in a down market?"

California played a major role in the rising real estate market of the early 2000s, both in the form of immigration into Southern Oregon, creating a high demand for housing, and investing capital in local projects.


"That's dried up because California is in the same holding pattern," Pawlowski said. "So we've gone from tremendous growth back to where we were previously. We saw an unprecedented boom-and-bust cycle. I don't know of anybody who's seen anything like this — it's extraordinary what took place and I don't see it repeating in my lifetime."

Commercial real estate broker Wade Six likens what happened to local real estate developers to a game of musical chairs.

"We all knew from 2006 into 2008 that at some point the music was going to stop," Six said. "Based on the trajectory (from earlier in the decade), developers were making the correct moves as long as things stayed the way they were. Then the music stopped and it was like someone put a new record on the machine and said 'dance to this.' It's a brave new world."

Deep pockets are more important than ever, he said.

"Few landlords have access to credit or can write a check for (the amount needed)," Six said. "If you are a bank today, where are you going to put your money — Medford, Oregon, or the Seattle market?"

One element of the Cedar Landing project was retirement housing.

To make money, senior living communities need an occupancy in the mid-90 percent range.

"Across the board it's 75 to 80 percent and in the lower-level care facilities it's less because mom and dad are staying at home longer," Six said.

What was once considered a key element in many developments because of baby boomers moving toward retirement is no longer something to bank on.

"The paradigm that existed several years ago is no more and isn't coming back soon, if ever," Six said.

The $400,000 homes that made many a development loan pencil out are no longer attracting buyers.

"In those cases," Six said, "it almost takes a change of ownership to recalibrate the value and to create new value."

Reach reporter Greg Stiles at 541-776-4463 or email business@mailtribune.com.



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