Development Near Station Needs to Be SMARTer, Say Real Estate Brokers

will likely need high-density housing and buildings as high as six stories in order for the project to be economically feasible, according to a local commercial real estate expert and the site’s planners.

“What mix makes economic sense?” said Daniel Parolek, an architect with Opticos, the Berkeley design firm that is developing the site plan, at a Sept. 7 workshop with the Community Advisory Committee. “How fantastic of an experience could it be to have a couple of those six-story buildings as you enter the station, guiding you to the river?”

The station area stretches from D to East Washington streets and Lakeville Street and the Petaluma River, and extends to the Golden Eagle Shopping Center. Parolek estimates that high-density housing, with up to 520 apartment or condo units, would make the project attractive to investors.

The design firm is pushing for mostly residential units, some of which could later be converted to retail or office. That's because office and retail spaces are already planned for the Target shopping center on East Washington and the yet to be approved  on McDowell Boulevard, and planners want to be careful to not create too much retail space that would then be vacant.

Others agree that high-density housing is the way to go, but caution about the higher upfront costs, which may or may not be recouped through higher revenue from rents.

“The development needs to be focused on high-density housing,” said Paul Andronico, vice president of Basin Street Properties, which manages the Golden Eagle site.  But “mixed-use doesn’t necessarily fit everywhere. And when you get above three stories, it gets more expensive to build.” 

Extra support structures, licensures and other fees can quickly push the cost structure up with added floors. The city has already discussed reducing its , and Opticos is in talks with SMART and the city to have those fees either reduced or cut for the SMART station site. Still, it’s hard to see the entire project coming to fruition without some other capital, said Andronico.

“I don’t know how they (can) do it without public funding,” Andronico said. 

Everyone involved seems to agree that the entire site needs to be redeveloped, but how to actually get the dozen or so current landowners to develop in a shaky economy remains one of the biggest obstacles.

The city already owns a small parcel, as does SMART, but a high-level of coordination would be necessary to build up the rest, said Karren Bell Newman, a Petaluma real estate broker.

“All those parcels need to be developed together,” said Bell Newman. “This is why I’m apprehensive about this. Developers have to take the most financial risk.” 

The problem for landowners isn’t that they don’t want to redevelop, said Bell Newman, who sits on the advisory committee for the site plan; it’s that the financial risk and costs involved with building may be too much for any current landowner. Sales of plots would have to be made, or new land-owning partnerships would have to be forged with third parties, in order for the current owners to have enough money to build.

With talks ongoing, one group circling the project is St. Anton Partners, a Northern California affordable housing property developer, owner and manager. St. Anton is in escrow to buy the property in front of the Petaluma Arts Center, with plans to add about 150 affordable housing units, according to Ken Bizzell of Keegan & Coppin. 

But it could take several months before the deal closes. The Haystack property is currently entangled in the courts after its owner, private bank Cascade Acceptance Corp., filed for bankruptcy last year. St. Anton has been in talks with the city and could receive federal tax credits and tax-exempt bonds for developing affordable housing, another option toward public funding.

Opticos plans to bring its economic advisor, Ed Starkie, to the next workshop with the idea of discussing economic feasibility. The city hasn’t picked a date for that workshop, but it is planning it sometime in late October or early November.

What would you like to see developed on the site?