(For more retail coverage, click GlobeSt.com/RETAIL.)
PORTLAND, OR-Trammell Crow Co. has bought out its majority partner in Cascade Station Development Co., the developer of Cascade Station, a 120-acre mixed-use development site at Interstate 205 and Airport Way where construction is about to begin on an 800,000-sf destination retail center. The purchase price has not been disclosed by TCC and was not otherwise immediately available. A source at TCC tells GlobeSt.com that Bechtel was by far the majority owner and that the transaction closed late last week.
Concurrently, TCC says it has completed previously announced transactions with Ikea and Costco Home, which will book-end the 765,000-sf retail portion of Cascade Station with 280,000-sf and 120,000-sf stores, respectively. The balance of the retail space, named the Village at Cascade Station, will be a joint development between TCC and Tigard-based retail specialist CenterCal Properties. The duo says it expects the center will be 80% preleased when construction commences in the coming weeks, including commitments by several tenants that will be making their Oregon debut. The center and its two ghost anchors are expected to open in the summer of 2007. The rest of Cascade Station is slated for a hotel or two and about one million sf of office space.
The necessary infrastructure for Cascade Station--from utilities, tree-lined streets and light-rail stops to sidewalks, grassy knolls and benches--has been in place since the light rail line was completed about five years ago. Cascade Station was a key element of the plan when the City of Portland made the decision to invest urban renewal funds in the Airport Max light-rail line in 1999.
As part of the negotiations, the Port granted the city's urban renewal agency, the Portland Development Commission, the long-term development rights to the Cascade Station land in exchange for the PDC's $51.2-million financial commitment to the construction of the light-rail line to the airport. Believing that successful redevelopment of the property would depend on private-sector financial participation, the PDC assigned the development rights to the Bechtel-TCC joint venture in exchange for a $28.38-million senior obligation bond and a $14-million junior obligation bond. The PDC then used the senior note to pay off the tax-exempt bonds issued to cover the PDC's portion of the light rail line.
After amending the development agreement in 2005 to correct a strategic mistake that caused the project to languish for years, the PDC in June directed staff to negotiate a restructure of its remaining financial interest in the development of Cascade Station, the $14-million junior obligation bond. Payment on the junior note was to come from gross revenues generated by the Cascade Station development. Instead of waiting for that, the PDC assigned its junior note back to the Bechtel-TCC JV in exchange for development rights to 36 acres of Cascade Station land planned for office development, which Trammell Crow then acquired from the PDC for $14 million.
The original plan for the retail portion of Cascade Station--400,000 sf of retail in buildings no larger than 60,000 sf--was not successful, in part because it was essentially a neighborhood shopping center concept without a neighborhood due to its proximity to the airport. In February 2005, after the city and developers found out about Ikea's interest in opening a 280,000-sf store in Portland, the retail development plan for the area was quickly revised to allow buildings as large as 205,000 sf (Ikea's preferred footprint) and expanded to 800,000 sf to account for the expected demand to be close to the destination retailer, which has panned out. In turn, it is expected that the retail will give companies reason to relocate their employees to the area, sparking prelease commitments that the developers could then use to obtain construction financing for the project's office component.
For previous stories on Cascade Station, click on one of the following links:
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