This question is top of mind for those who see what is happening to the Kruse Way Place office buildings. The 3 buildings have been emptied of occupants for some time now with only a few tenants left. The halls are devoid of workers, the parking lots are empty, and the offices vacant and dark.
What is going on? Are many businesses closing or downsizing? Are more people working from home? Why hasn’t the landlord lowered the rent and advertised more to fill the empty spaces? None of this makes any business sense. You don’t kill your revenue stream while paying increasing expenses just to pay taxes, utilities and insurance and keep the buildings viable. So what’s the truth about Kruse Way Place?
One thing that IS going on is that the land owner has applied for a zone change from O-C/R-3 (Office Campus / High Density Residential) to R-O (the highest density residential possible). Their application puts forward a conceptual plan for new apartments to take the place of the existing office buildings. These plans are suggestions only and have nothing to do with what can or will be built on the property if the R-0 zoning is achieved. One thing that is certain is that if the city approves the request for a “Comprehensive Plan Map Amendment”, the land will instantly be worth more than it is under current zoning. This is called Zoning Arbitrage. Is this the goal for the zone change request? Re-value the property for more intense use for the profit of the current land owner?
The problem for Lake Oswegans is that once done, an R-0 zone can never be rescinded, and with no plan for what will be built on the property, it could be a disaster for the city. Imagine 3 - 5 Windward Apartments or Mercato Grove buildings on a single property along Kruse Way with 600-1,000 units. Then imagine what the state, Metro and the LO planning department have in mind for the rest of Lake Grove and the city!!!
Who gains and who loses in this deal?
Who is watching out for the interests of Lake Oswego residents?
Who do the LO bureaucrats and politicians work for?
Whose city is this?
BTW: NIMBY is not a bad word - it denotes a person who cares deeply about the place they live and defends it against bad influences, actions and policies. Mothers and fathers are like that with their children. People who call a place home are like that with their neighborhoods and towns.
Here are 2 articles that explain the way Zoning Arbitrage works for real estate investors. Click on the links for the full text of each piece.
https://deepblocks.com/blog/category/zoning/zoning-arbitrage-unlocking-hidden-value-in-real-estate-investments/
Zoning Arbitrage: Unlocking Hidden Value in
Real Estate Investments
Olivia Ramos
November 11, 2024
Understanding Zoning Arbitrage
Zoning arbitrage refers to capitalizing on differences in zoning regulations to maximize the value or profitability of real estate investments. This strategy involves identifying properties where the current zoning laws either undervalue the property's potential or are likely to change in a way that increases the property's value.
https://hold.co/blog/zoning-arbitrage
Pros and Cons of Zoning Arbitrage in
Real Estate Investing
If you spend any time around real‑estate investors, someone will eventually drop the phrase “zoning arbitrage” with a mischievous grin—usually right after they’ve run the numbers on a deal no one else noticed. The idea is simple enough: buy property that’s currently valued under one zoning designation, then unlock a more profitable use through a rezoning request, variance, or by leveraging pre‑existing loopholes.
Done correctly, that single change can make a sleepy parcel of dirt worth multiples of its purchase price. Sounds almost too good to be true, right? Yet zoning arbitrage is perfectly legal, remarkably lucrative, and—depending on whom you ask—absolutely loathed. City councils worry about neighborhood character, residents fear traffic and gentrification, and NIMBY forums ignite faster than a flare.
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