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6
Mar

Hillsboro approves $120M development at Orenco Station

Orenco-masterplan-site-573wIt’s not easy putting the “urban” in “suburban,” but after nearly two decades of planning, the city of Hillsboro has taken the final step toward finishing the effort at Orenco Station.

In a unanimous vote on Tuesday, city councilors approved an agreement with Holland Development for the development of the community’s four remaining vacant parcels. Holland hopes to break ground this summer on a $120 million project featuring construction of three six-story multifamily buildings with a total of 580 units, 20,000 to 25,000 square feet of retail, and a public plaza similar to Jamison Square in the Pearl District.

Developers plan to take advantage of state tax abatements and some creative financial solutions. The project will primarily require a rethinking of suburbia.

“We envision a place where people can live, work, shop and play all within a few blocks of where they live,” said Gary Vance, development director for Holland Partners Group

At present, Orenco Station has 1,800 single-family houses, townhomes and multifamily apartments, as well as parks and retail businesses like New Seasons Market. Holland previously built a 190-unit apartment complex called Platform 14, and is constructing a 304-unit, wrap-style apartment complex called Tessera.

Construction also is under way for a 45-unit senior living facility called Alma Gardens near the northwest corner of Holland’s planned project; Reach Community Development hopes to begin construction of a 57-unit affordable housing project to the east of Holland’s in the spring of 2014.

Holland’s new development involves three parcels of land at Orenco Station’s south end. The parcels surround a fourth parcel, on which a public plaza will be developed directly adjacent to the MAX light-rail line. To move the project forward, Holland transferred ownership of land originally slated for 90 townhomes to the city for use as a 4.16-acre park just north of Tessera.

Although a significant amount of design work already has been done on the future Orenco project, it still is required to go through the Hillsboro Development Review process, which is an administrative land use decision with notice provided to surrounding neighbors.

Surrounding the plaza will be the 245-unit East Podium building, with 10,000 square feet of retail space; the 114-unit Central Podium building, with 7,000 square feet of retail space; and the 220-unit West Podium building, with 5,000 square feet of retail space. All will have structured parking.

Vance said Holland is negotiating a disposition and development agreement with TriMet to incorporate into the project a park-and-ride garage that the transit agency owns and operates on the property slated for the West Podium building.

“The vision of the entire project is to really create a compact, walkable neighborhood, and that’s why the city is willing to use existing financial tools to achieve those visions,” said Colin Cooper, assistant planning director for the city of Hillsboro. “It relates to the job growth of Intel, which this site is very near, and the job growth throughout the high tech (industry).”

After Intel announced in October that it would build a second, $3 billion fabrication facility at the Ronler Acres campus, Salesforce.com announced in February that it would open an outpost at the former Synopsys building nearby.

Of course, demand for housing is already strong. Jim Rostel, the principal broker at Orenco Realty LLC, has been selling and managing homes at Orenco Station for the past 12 years. He said rents have increased steadily over the past 12 to 16 months. Also, homes are selling quickly and for higher prices.

“There’s more competition for the properties that come on the market and they’re moving quite a bit faster,” Rostel said.

Hillsboro and Holland are banking that job growth will spur demand for high-density housing, which doesn’t pencil as easily in suburbs as in cities. That’s where tax abatements from a Vertical Housing Development Zone come in.

The program, adopted by the Legislature in 2005, is intended to foster density and provide developers 40 to 80 percent property tax abatements for up to 10 years. Holland is seeking an 80 percent tax abatement from Oregon Housing and Community Services, which has already granted a 60 percent abatement for Tessera.

The idea is that after the life of the abatement, the estimated property tax revenue will be two to three times greater than if a smaller development were built without the incentive. The state still needs to approve the zone; Cooper said that could take up to 45 days. During that time, comments will be accepted from representatives of entities that could be affected.

During its Tuesday meeting Hillsboro City Council also approved modifications to financing arrangements for system development charges. The city’s policy requires developers to pay 15 percent of SDCs up front, with biannual payments to follow for 10 years. Holland requested to pay 5 percent down, with biannual payments beginning 180 days after occupancy in order to coincide with the state tax abatements. The company also asked for the ability to transfer the SDC financing should it sell the project down the road.

Holland has started leasing out the residential units at Platform 14, and has signed two commercial tenants – Salam, a Lebanese and Persian restaurant; and Orenco Tap House, a pub – to occupy the ground floor. A cycle shop and a frozen yogurt business also are expected to sign agreements.

Michelle Diamond Rozakis, a Real Estate Investment Group principal broker who is working on that effort, said the destination will have an ultra-local focus.

“(Hillsboro) has plenty of corporate and national guys within a mile of the vicinity of Intel and Orenco, but what they don’t have is the guy in Northwest Portland who does all Northwest organic food, organic coffee or drinks,” Rozakis said. “We think with everyone moving there, especially with the Intel and Salesforce guys, and the creative types, that those types of tenants will be very successful.”

Instead of a chain like 24 Hour Fitness, Rozakis is looking for independent yoga and pilates studios. Instead of a business like BJ’s Restaurant and Brewhouse, she’s talking to Portland breweries. Also, Beaverton-based Ava Roasteria, a 24-hour coffee shop, is planning to occupy a large space in the plaza.

The tenant mix will be critical because Hillsboro and Holland aren’t the only ones that need to buy in on the concept of an urban suburbia.

“We’re really looking to draw these guys out of their comfort zone,” Rozakis said of the traditionally city-based boutiques, “and into a similar urban district where everybody is walking and biking and interacting with their neighbor.”

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