How to team up to build around transit stations

Development patterns in Oregon’s largest metropolitan area have shifted toward somewhat denser, mixed-use configurations — a change that helps explain why people in the Portland area have, since 1996, been able to reduce the number of miles driven per capita, even while Americans on the whole have increased their driving.

Some of the transit-oriented development in the Portland region development has come about as a result of the TriMet transit agency’s teaming up with private developers and other public entities — a process known as “joint development.” It’s the kind of collaborative endeavor that the Center for Transit-Oriented Development (CTOD), the American Public Transportation Association (APTA), and the Federal Transit Administration (FTA) would like to see more of across the nation.

Last month, CTOD, APTA, and FTA sponsored a national webinar to examine both the benefits and the difficulties of joint development. Jillian Detweiler, TriMet’s director of real estate, used a 54-unit apartment building near the North Killingworth light-rail station in North Portland as a case study in how to carry out such projects.

Detweiler explained that when construction of the MAX Yellow Line was coming in below budget, TriMet sought and received approval from FTA to shift  $4 million from a contingency fund to transit-oriented development. Working with local partners, TriMet concluded that the funds should be used to demolish the troublesome old Crown Motel — “a thorn in the neighborhood’s side for a long time,” according to Detweiler — and build permanently affordable housing on its site.

Density and affordability

“We wanted density and affordability,” she said. “The design was critical to neighborhood acceptance.” Instead of issuing a request for proposals — RFPs require expensive-to-produce detail, which discourage some bidders — TriMet issued a request for qualifications and then evaluated the proposals based on the respondents’ understanding of the agency’s goals for TOD. This led to negotiation of an agreement with the winning development team, REACH Community Development.

Selection of the developer was accomplished very quickly — in little more than three months. Financing was slower. “It took another 18 months for REACH to secure financing,” TriMet says in a 117-page November 2010 report, “Livable Portland Land Use and Transportation Initiatives.”
Jayme Blakesley at FTA said his agency allows federal transportation funds to be used for TOD in certain instances — such as when it would help generate revenue for public transportation and would not involve construction of a commercial revenue-producing facility (other than an intercity bus station).

TriMet agreed to sell the Crown Motel property at $600,000 less than its market value. The discount was based on calculations indicating that over 30 years, residents of the project, Patton Park Apartments, would generate that much money through transit trips. Funds for the 5-story building included low-income housing tax credits, a $4 million grant from the Portland Development Commission, and a small grant from Metro.

The housing, accompanied by 4,600 sq. ft. of commercial space, offered the advantage of being near both a light-rail station and a park. It includes eight three-bedroom units for very low-income families, financed by project-based Section 8 subsidies. The ribbon-cutting took place in February 2009 — four years and seven months after TriMet started on the process with FTA. It occupies a 24,000 sq. ft. lot and has .7 parking spaces per apartment.

Though it wasn’t quick, “the project has been well received in the neighborhood,” Detweiler said. There had been fear that the light-rail line would bring gentrification to a relatively low-income area. The project allayed those concerns. “Two-thirds of the residents [of Patton Park Apartments] are minorities, many of them from the north and northeast neighborhoods,” she pointed out.

Slow progress at times

In the webinar, John Hagner, a real estate lawyer in Washington, DC, presented a second case study: the Rhode Island Row project — 274 apartments organized along a “main street” containing 70,000 sq. ft. of commercial space — at the Rhode Island Avenue-Brentwood Metro rail station in the northeast quadrant of the capital.

The four-story, $109 million project broke ground in May 2010, nine years after the Washington Metropolitan Area Transit Authority concluded a competitive solicitation that awarded the 8.5-acre site to a joint venture of Urban Atlantic and A&R Development Corp. The project is about a quarter occupied with completion expected this September. It is said to be the first mixed-use residential and retail development in the nation combining HUD multifamily financing with New Markets tax credit equity. Ten percent of the retail space is to be leased to local businesses.

Hagner said that when a project involves many public and private participants, it’s essential to fully understand the zoning, loan requirements, equity requirements, and other components. “You have to ferret those out to find where are the conflicts. It goes on for an interminable period,” he said. “Each participant has the ability to kill the project. You’ve got to keep these all happy. Sometimes you have to seek a political solution because there’s not enough compromise.”

Rhode Island Row, 20 percent of its apartments designated affordable, was designed in a planned-unit-development process. The commercial part of the project was required by one regulation to generate at least 20 percent of the project’s income but was prohibited by another regulation from generating more than 30 percent of its income. Such requirements, somewhat at odds with one another, make joint development projects particularly complicated.

The project was scheduled to close in October 2008, but the national financial crisis aborted that, and interest rates on tax-exempt bonds shot up to 8 percent from 3 percent. By the time the closing took place in March 2010, Hagner said, “we had a completely different capital stack.”

Adding to the difficulty, the developer was ordered not to do anything that would stop trains or buses during construction. On a dense site with 7,000 passengers boarding buses each day, ”that’s really a challenge,” he observed.

For some helpful tips on planning for transit oriented development, click here.