The Yards. Portland, Oregon. Project Type: Residential. Case No: C Year: 2004

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1 The Yards Portland, Oregon Project Type: Residential Case No: C Year: 2004 SUMMARY In Portland, Oregon, a public/private partnership has transformed a brownfield into a community of 600 affordable and market-rate apartments. The Yards is a cornerstone of redevelopment in the city s rapidly changing River District. The project s name reflects the history of the site, a rail yard on a strip of land that runs between the train tracks and the Willamette River. The four-phase development, which is entering its final phase, converts a large area affected by industrial contamination into a clean, safe, mixed-income residential neighborhood. FEATURES Public/private partnership with multiple public goals and new strategies for achieving them Precedent-setting brownfield redevelopment, involving the application of new scientific knowledge and construction techniques Creative reuse of rail yard land, a typical inner-city location historically shunned by housing developers Effective investment in historic preservation providing view corridors and access to a restored train station

2 The Yards Portland, Oregon Project Type: Residential Subcategory: Multifamily Volume 34 Number 05 January March 2004 Case Number: C PROJECT TYPE In Portland, Oregon, a public/private partnership has transformed a brownfield into a community of 600 affordable and market-rate apartments. The Yards is a cornerstone of redevelopment in the city s rapidly changing River District. The project s name reflects the history of the site, a rail yard on a strip of land that runs between the train tracks and the Willamette River. The four-phase development, which is entering its final phase, converts a large area affected by industrial contamination into a clean, safe, mixed-income residential neighborhood. SPECIAL FEATURES DEVELOPER Public/private partnership with multiple public goals and new strategies for achieving them Precedent-setting brownfield redevelopment, involving the application of new scientific knowledge and construction techniques Creative reuse of rail yard land, a typical inner-city location historically shunned by housing developers Effective investment in historic preservation providing view corridors and access to a restored train station GSL Properties, Inc S.W. Park Place Portland, Oregon Fax: ARCHITECTS/LANDSCAPE ARCHITECTS Otak, Inc S.W. Boones Ferry Road Lake Oswego, Oregon Fax: Zimmer Gunsel Frasca Partnership 320 S.W. Oak Street, Suite 500 Portland, Oregon Fax:

3 GENERAL DESCRIPTION The Yards is a cornerstone of redevelopment in the rapidly changing River District of Portland, Oregon. The name reflects the history of the site, a rail yard on a strip of land that runs between the train tracks and the Willamette River. The large-scale redevelopment, a four-phase project now entering its final phase, converts a large area affected by industrial contamination into a clean, safe residential neighborhood for nearly 600 households. It originally was conceived to serve municipal planning goals, which include a more solid linkage between the city center and the river shore; adaptive use of the railroad land; historic preservation; pedestrian-friendly streets and plazas; and mixed-income housing that adds to the stock of high-quality, affordable rental units. THE SITE The River District is a 30-acre (12-hectare) redevelopment district located along the shores of the Willamette River north of downtown Portland. Although in the 1990s the city became known as a national model of redevelopment and livability, this large swath of land was left behind. Anchored by a historic rail station and dominated by a modern postal distribution center, the 200-block area was characterized by empty lots and vacant warehouses. Near its southern boundaries, the district now includes upscale urban neighborhoods at the edges of downtown Portland, including Chinatown and the Pearl District. The Yards is located near the extreme northern end of the River District, on 6.1 acres (2.5 hectares) of land used first as a rail freight depot. A passenger station was completed in 1896, but over the last century freight loading and unloading activities moved to other locations. The strip of land is bounded on one side by the Burlington Northern railway; the historic Union Station lies directly across the tracks. On the other side, between the site and the Willamette River, is a city street and a row of older warehouses now used for parking. The Broadway Bridge passes nearby to the north, crossing the river to the east side of Portland. Across the tracks and now accessible by a pedestrian overpass is a multimodal transit station for bus and streetcar service to points in downtown Portland, connecting the light-rail line that serves the metropolitan area with the train and with Portland International Airport. The site was contaminated with diesel and petroleum products containing hydrocarbons, polynuclear hydrocarbons, lead, and arsenic. Unsaturated soils containing crude oil covered approximately a quarter of an acre (one-tenth of a hectare), and oil contamination up to ten feet (three meters) deep was found in places. While soil contamination called for mitigation measures, sample wells identified no evidence of significant groundwater contamination, and therefore no groundwater mitigation was required for development. In 1987, the Portland Development Commission (PDC) the city s redevelopment agency acquired the land and proceeded to renovate the historic train station. At the time, the River District was under study as a possible site for the Oregon State Convention Center. DEVELOPMENT PROCESS After the River District was passed over in favor of another site for Portland s new convention center, an ambitious 1994 plan called for a dense urban neighborhood with 5,500 units of housing, or 100 units per acre (247 units per hectare). In 1995, the PDC selected GSL Properties, Inc., and the Housing Authority of Portland as the developers for the Yards through a competitive proposal process. It chose GSL Properties because the firm s proposal reflected its ability to deliver housing on the site at densities that approached the PDC s goals for the district. GSL Properties is a 300-person, Portland-based firm that develops and manages multifamily rental property in Oregon, California, New Mexico, and Nevada. In business since 1985, it has developed more than 6,000 rental units and rehabilitated another 2,500. GSL builds to hold rather than sell, and currently owns about 8,000 units, including a mix of market-rate and moderate- and low-income housing. The company has substantial experience in Section 42 housing financed with tax-exempt bonds and federal low-income housing tax credits (LIHTCs). A disposition and development agreement (DDA) between GSL and the PDC governs the terms of the sale of land for the Yards to GSL. The land was priced on a per-developed-unit basis, at market rates at the time the DDA was signed, with some price adjustments for below market-rate units. The DDA also set the terms for gap financing for the project to be provided by PDC, as well as detailed requirements and timelines for development itself. The city of Portland participated in the project by providing more than $4 million in infrastructure, including the aforementioned pedestrian bridge across the railroad tracks between the new housing development and the historic rail station, the new multimodal transit station, and downtown Portland. The city also built a public plaza on top of the developer-built parking garage base, which links the pedestrian bridge to a street crossing on the other side of the Yards and to further walkways to the river. The project hung in the balance after initial planning efforts were completed and final geotechnical tests uncovered the presence of significant soil contamination. Requirements for traditional remedial actions at the site the removal and disposal of 100,000 cubic yards (76,460 cubic meters) of contaminated soil in a landfill would have cost

4 approximately $65 million and thus precluded development. Because it is a public agency, the PDC could not provide indemnity against third-party liability, and the original general contractor and lender withdrew from the project. While the PDC sought to save the project, emerging scientific knowledge about mitigation provided an alternative method of remediation: capping and institutional controls. The use of this method resulted in only a small fraction of the contaminated soils actually being moved from the site, in order to build below-grade parking. Throughout the remainder of the project, a permanent fabric barrier placed under the foundations and landscaping allows hydrocarbons to continue to biodegrade, while isolating the residues from the development at grade. Special measures and blood test monitoring protected construction personnel from significant exposure, and ongoing annual inspections ensure that the integrity of the cap is maintained. Because the city was unable to indemnify prospective lenders for the contamination once the land was conveyed, they were unwilling to finance the project before capping was complete. The DDA therefore was amended to lease the ground to the developer, pending completion of construction and capping and the issuance of a no further action letter by Oregon s Department of Environmental Quality. Then the land was conveyed in fee. To achieve the densities called for by the PDC within a cost-effective development, the project had to be designed as five stories of wood-frame construction over a concrete base. Yet blanket provisions in the Uniform Building Code precluded this type of construction. The PDC and the development team successfully petitioned for a change in the code that made this construction type allowable in Portland, as it is in nearby Seattle. FINANCING The PDC required developer equity in the Yards. However, in addition to the land loan to GSL, the PDC made a low-interest loan to the project, supplementing federal tax credits and the sale of tax-exempt bonds to provide construction and permanent debt. The PDC further partnered in the project by financing the construction of the public infrastructure, including a public plaza and a pedestrian bridge. A local improvement district was formed to rebuild the adjacent street with new sidewalks, street trees, and a traffic signal. The project also received a ten-year city tax abatement. The Yards is divided into four phases of development, each of which used a different financing mix. Throughout the project, the primary source of equity is federal LIHTCs. After the first phase, which also was financed with state of Oregon bonds and a low-interest loan from the PDC, GSL contributed equity of its own. In the first phase, all 158 units were designated for rental to households earning 50 to 60 percent of the area median income. This section of the Yards is owned by a partnership consisting of the Housing Authority of Portland as general partner and a tax credit investor as limited partner. The Oregon Housing Authority provided construction financing and long-term loans based on $7.2 million in bond proceeds. Sales of LIHTCs provided another $4 million in equity. And the PDC furnished a cash flow only loan for $1.8 million at 3 percent interest. The second and largest phase of the Yards includes 132 units that rent to households earning 60 percent of area median income and 189 market-rate units. For this phase, GSL stepped up as owner, through an affiliate limited liability company, with a tax credit investor as its partner. Primary permanent debt was provided by $23 million in Oregon Housing Authority bond proceeds. During construction and stabilization, credit enhancement for the bonds came from U.S. Bank in the form of a letter of credit, with participation by Key Bank. Fannie Mae guaranteed the bonds on a permanent basis. In addition, this phase was financed by a $5.5 million, cash flow only loan from the PDC at 3 percent interest. Tax credit (LIHTC) equity came to $4.4 million, and developer equity amounted to $1 million. The third phase of the project consists of 56 market-rate rental units. Key Bank provided a $4.75 million construction loan and Sterling Savings provided take-out permanent financing. The rest of the cost was covered by $250,000 in developer equity and an $800,000 loan from the PDC at 3 percent interest and 30-year amortization. PLANNING, DESIGN, AND APPROVALS The Yards was designed by two firms based in the Portland area, Zimmer Gunsul Frasca Partnership (ZGF) and Otak, a multidisciplinary architecture, engineering, and planning firm. ZGF, which is known for local and national projects involving critical urban design issues and public and institutional architecture, master planned the entire development. The firm also was responsible for the design of a signature pedestrian bridge over the railroad tracks, landscape elements in the plaza and courtyards, and the third-phase rental units. Otak came to the project with a portfolio of large multifamily developments involving wood-frame construction, including several for GSL. Otak designed the parking structure plaza and most of the housing units at the Yards. In keeping with the PDC s redevelopment priorities, the Yards and its walkways, landscape, and street rights-of-way are a key element in the effort to draw investment north of the city and connect the station area and the River District to the river shore. As mentioned previously, the project s completion was contingent on changes in Portland s zoning code that allowed five stories of wood-frame construction over one story of concrete. It also required an exceptionally low parking

5 requirement of 0.75 space per unit, a number that was adjusted in acknowledgment of the proximity of transit and employment centers. In the first three phases, 535 studio, one-bedroom, and two-bedroom apartments are distributed among seven buildings. Parking for 208 cars is fitted into a subgrade, three-level parking structure. The parking structure lies at the center of the project and supports a pedestrian plaza built on top of it. The plaza is dominated by the pedestrian bridge structure, which steps up from the paved surface and crosses to the historic station area, providing a visual landmark for the Yards and a vantage point from which to view the tracks, the city skyline, the historic station, and the Yards itself. On the opposite side of the plaza, a cascade of stair steps and landings leads down to a crosswalk and a path that leads through an older condominium community to a walkway along the river. A city street, Naito Parkway, was extended to the north, where it runs beside the base of the Yards as the newly named Iron Horse Way, a private street that provides additional parking for the project. This new street turns between the first-phase housing structure and the rest of the project to provide vehicular and emergency vehicle access to the site, and to Front Street on the other side. At present, the Yards contains four apartment buildings with more than 100 units each, plus three smaller townhouse structures with a total of 56 units. Approval for the plan was linked to its conformance with design guidelines in a special zoning overlay for the River District. According to the terms of the overlay, the Yards also was subject to a public review of the design. With the ambitious density goal of more than 100 units per acre (247 units per hectare), the development team was challenged to visually break up the project s bulk and scale while controlling costs and accommodating a generous amount of open space. It met this challenge through several different design approaches: Configuration. Seven separate buildings wrap around a series of open spaces and courtyards. This arrangement affords pleasant views from within and outside all of the units, provides a sense of safety, and allows outdoor landscapes to help establish the identities of the buildings and the individual apartments. Four of the apartment buildings are four or five stories in height. In contrast, three buildings are three stories high, with two-story townhouse units over base-story apartments, all accessed from the outside. Character. The development team had to choose between a design that would effect a hard-edged industrial look or one that had more in common with traditional garden apartments, with steep roof slopes and projecting balconies. Guided by public input during the review process, the designers opted to give the Yards an urban character with recessed balconies, low roof slopes, and a palette of simple surfaces and industrial materials. Complexity. The long elevations of the four- and five-story apartment buildings are modulated by features like stair towers, projecting angular and bowed bays, and balcony openings. Roof lines are just steep enough to be visible from the ground, and segments of barrel-vaulted roofs are interspersed with stretches of low-sloping peaks and flat surfaces for roof decks. The scale of the buildings is further mitigated through the use of different materials and colors. Corrugated metal siding alternates with cement board in smooth and lapped applications. A saturated palette of colors, ranging from gold and rust to greens and blues, is combined with background grays. Each apartment building contains a mixture of studio, one-bedroom, and two-bedroom apartments on a double-loaded corridor. Elevator lobbies have ceramic tile floors, and all corridors are relieved at the ends with natural light. Units are carpeted and fitted with aluminum doors and windows, with wood exterior doors to balconies. Residents have access to roof terraces, which are furnished with plantings and seating. Construction phasing for the Yards started at the northern edge of the site and moved south. It began with a U-shaped apartment building wrapped around a landscaped courtyard in which sculptural rocks are integrated with plantings and paving. As the first structure was built, excavation, the removal of contaminated soil, and construction of the parking structure proceeded, in preparation for the second-phase apartment buildings. This phase included three L-shaped buildings and three landscaped courtyards, with the central structure built around a plaza that tops the three-level garage. Otak designed all of the first- and second-phase buildings. The third phase, designed by ZGF, consists of a trio of three-story apartment buildings, two of which sit parallel to the train tracks; the third is perpendicular to the tracks at the southern edge of the Yards. Another 37-unit apartment building, also designed by Otak, will be built at the southernmost tip of the site by July MARKETING, TENANTS, AND MANAGEMENT Even before construction of the Yards began, the adjacent Pearl District a former warehouse area inside the boundaries of the River District was becoming a trendy neighborhood of art galleries, boutiques, and restaurants. Luxury condominiums there were selling quickly, reflecting a strong market for housing close to downtown Portland. When the first phase of the Yards was ready for the market, demand was high. The physically prominent development could be seen from major arterials, including the Broadway Bridge.

6 The affordable units in the first phase of the Yards rented quickly to income-qualified tenants. Units in the following phases both market rate and affordable typically rented up within four months with minimal marketing efforts by the owners, including banners and real estate newspaper ads. Occupancy has remained at or near 95 percent, within expected turnover rates. The tenant mix contains relatively few families with children or retirees. The typical renter at the Yards is a young adult in a first job, and many are administrative or service workers. All prospective tenants are carefully screened with credit checks and criminal record verification. Rules infractions and late rents are quickly met with warnings, followed by timely eviction. EXPERIENCE GAINED The Yards has achieved the primary goals of its public partners. It has filled a swath of underused land with new housing, including affordable apartments. It has created a pedestrian-friendly neighborhood that anchors an entire urban renewal district and ties it more closely to the riverfront. And it has helped stimulate new private investment in surrounding areas. The project is a bold experiment in planning and development that involved considerable risk for its partners. While precise rates of return for GSL have not yet been determined, the Yards is yielding a small return on private investment. As a model of urban renewal, the Yards demonstrates that: A railroad track can be an asset to design and an attraction to residents. The master plan and building components of the Yards capitalize on the mystique and historic appeal of the tracks and station, building new circulation routes over the rails for pedestrians and reflecting the tracks' industrial materials and character. Pervasive contamination is not a death knell to housing construction. If conditions can be verified and controlled, certain kinds of pollutants can be isolated and managed on site. Otherwise unusable land can be restored to the urban fabric. If a city is willing to partner with developers in addressing its overarching public concerns, it can reach beyond existing zoning provisions by setting specific terms for land conveyance. In this manner, the public/private partnership for the Yards yielded more than 300 units of affordable housing enriched by pedestrian amenities and important connections between emerging neighborhoods and the river shore.

7 PROJECT DATA LAND USE INFORMATION Site area (acres/hectares): 6.1/2.5 Percentage complete: 94 Gross density (per acre/hectare): 94/232 Off-street parking spaces: 202, plus approximately 50 on private street LAND USE PLAN Use Acres/Hectares Percentage of Site Buildings 2.14/ Streets/surface parking 0.85/ Landscaping/open space 3.11/ Total 6.1/ RESIDENTIAL INFORMATION Unit Type Unit Size (Square Feet/Square Meters) Number of Units Current Monthly Rents Studio / $425 $650 1 bedroom / $550 $870 1 bedroom/den/1.5 bath 1,040 1,195/ $1,100 $1,300 1 bedroom/loft/1.5 bath 1,183/110 8 $1,100 $1,300 2 bedroom/1 bath / $675 $724 2 bedroom/1 bath 924 1,223/ $950 $1,300 DEVELOPMENT COST INFORMATION Site Acquisition Cost: $3,420,000 Site Improvement Costs: $2,500,000 Excavation/grading: $1,500,000 Sewer/water/drainage: $350,000 Paving/curbs/sidewalks: $150,000 Landscaping/irrigation: $500,000 Construction Costs: $36,353,000 Soft Costs: $17,170,000 Architecture/engineering: $2,789,000 Marketing: $325,000 Legal/accounting: $215,000 Taxes/insurance: $172,000 Title fees: $127,000 Construction interest and fees: $7,962,000 Permits, fees: $1,190,000 Development fees: $3,265,000 Other contingency reserves: $1,125,000 Total Development Cost: $59,443,000 DEVELOPMENT SCHEDULE Planning started: December 1994 Site purchased: DDA signed June 1995 Construction started: April 1996 Sales/leasing started: April 1997 Phase I completed: April 1997 Phase II completed: February 2000 Phase III completed: December 2002 Phase IV projected completion: July 2005 DIRECTIONS From Portland International Airport: Go south on I-205, west on I-84, south on I-5, and north on I-405. Exit at Fourth Avenue. Go north on Fourth Avenue to Harrison. Turn right on Harrison and go four blocks to Naito/Front. Turn left on Naito/Front. The Yards will be on the left after passing under the Steel Bridge. Driving time: 20 minutes in nonpeak traffic. Clair Enlow, report author Leslie Holst, editor, Development Case Studies

8 Julie D. Stern, interim editor, Development Case Studies David James Rose, copy editor Joanne Nanez, online production manager This Development Case Study is intended as a resource for subscribers in improving the quality of future projects. Data contained herein were made available by the project's development team and constitute a report on, not an endorsement of, the project by ULI the Urban Land Institute. Copyright 2004 by ULI the Urban Land Institute 1025 Thomas Jefferson Street, N.W., Suite 500 West, Washington D.C

9 The Yards has turned a six-acre strip of land between portland's historic train station and the Willamette River into a community of more than 600 households. It is the cornerstone of redevelopment for the city's River District.

10 Trainspotting is easy from the balconies and windows of the Yards, which has transformed a wasteland between tracks and river into a campus of badly needed rental housing for a mix of incomes.

11 The first phase of the Yards is built around a courtyard with plantings, paving, and sculptural stone. All of these apartments are reserved for households earning 60 percent or less of area median income.

12 The Yards stands as a bold urban companion to portland's Broadway Bridge (in background at right).

13 A pedestrian bridge (at left) connects the Yards to Union Station, the River District, and the rest of downtown portland.

14 Courtyards at the Yards are landscaped with mix of paving materials and plantings. The buildings and the landscaping are part of the cap that isolates soils contaminated during the train station's 100-year history.

15 The fourth and last phase of Yards, scheduled for completion in 2005, will fill in the southern tip of land. The three-story, 37-unit apartment complex covered by a unifying canopy will be a bold urban landmark in the River District.

16 Site plan.