Urbanizing suburbs face many challenges. Low-density development patterns prevail. Market forces traditionally dictate high parking ratios that consume large quantities of land and reduce land values. Lower land values make it expensive and difficult to support structured parking. Wider streets to accommodate higher traffic volumes must be longer to reach lower-density developed uses. Single-use zoning eliminates the potential for shared parking, which in turn decreases the efficiency of surface parking, increases the amount needed, and reduces its economic value.
Low-density development patterns disperse potential ridership for mass transit, including buses and light rail. That, in turn, increases the capital costs of building mass transit systems to serve these areas, as well as per-passenger operating costs.
West Valley City, six miles (9.7 km) from downtown Salt Lake City, evolved from the suburban communities of Hunter, Granger, and Redwood/Chesterfield, which united to incorporate as a city in 1980. As a result of a metropolitan Salt Lake City regional planning effort, the Utah Transit Authority later planned and built the new TRAX light-rail system with a western Green Line terminus in West Valley City, a 35.5-square-mile (92 sq km) area housing 130,000 people, making it the second-largest city in Utah.
A rendering shows the eight-story, 162-unit
Embassy Suites hotel at the intersection of
3500 South and Market streets.
It has no traditional downtown, and its most densely developed place is the 1.1 million-square-foot (102,000 sq m) Valley Fair Mall, built 42 years ago. It is a conventional midmarket, dumbbell-shaped mall anchored by Macy’s and JCPenney stores. Single level and single use, the mall was rehabilitated in 1980 and recently added about 100,000 square feet (9,300 sq m) of multipad exterior streetlike retail space to its western front.
A decade ago, the city council of the new West Valley City sought to create its vision of an urban heart for the city. The council dreamed of a main street lined with at least ten-story buildings that would become a transit-oriented development (TOD) at the foot of a new station at the TRAX terminus, says Nicole Cottle, West Valley City’s deputy city attorney at the time and now its community and economic development director. A park and civic center near a new city hall, a new library, and a new police headquarters would greet residents and commuters as they stepped off the light rail to reach new jobs in high-rise offices and new homes in apartment and condominium buildings.
The private sector would build all nonpublic buildings; the city would help by creating an urban renewal zone, which would capture and allocate the incremental tax revenues above the base assessed value that existed upon the district’s creation. The city envisioned up to $500 million of new private investment, so the tax increment financing would pay for the infrastructure and public buildings.
West Valley City issued a request for proposals (RFP) to engage a master developer from the private sector, selecting the Woodbury Corporation, a 90-year-old development company based in Salt Lake City that has developed and owns over 11 million square feet (1 million sq m) of hotels, retail centers, office buildings, and industrial complexes throughout the Intermountain West. The city hoped that Woodbury would acquire most of the 40 acres (16 ha) adjacent to and west of Valley Fair Mall.
The mall is at the southwest intersection of Interstate 215 and Route 171/Granger Road/West 3500 South. The land stretches south to Lancer Way and from Constitution Boulevard on its east to 32nd Street on the west. The land contained small retail structures on its north, as well as single-family houses and a mobile home park. Although traffic volumes were high on its eight-lane Route 171 northern boundary, other than being adjacent to the mall, the area had no characteristics that might suggest its transformation as a new city center.
Acquiring the area and converting it to an urban center challenged market forces. Woodbury was developing several more promising areas in Colorado and Utah. Because its leaders wanted a more rapid pace of development, the city took the aggressive action of becoming its own master developer, acquiring the properties and structuring the deals to make them happen. It set up its own redevelopment agency, populated by city council members, and gave it additional development powers so it could go far beyond the facilitation role that most redevelopment agencies play.
To head this development effort, the city enticed Cottle to lead its planning and economic development entities. Cottle, a real estate attorney, was determined to transform a version of the city’s earlier dream for a city center—which she had seen as a 35-year effort—into what she called a “buildable five-year plan.” She first organized an RFP for a market study, which led to the selection of MXD Development Strategists, a Vancouver, British Columbia, firm that has worked in cities in Asia and the Middle East, as well as Canada and the United States.
The master plan for the 40-acre (16.2 ha)
Fairbourne Station creates the framework
for a new town center at the same site.
The July 2010 market study outlined potential for 120,000 to 153,000 square feet (11,000 to 14,000 sq m) of retail space, 50,000 to 105,000 square feet (4,600 to 9,800 sq m) of office space, and 225 rental apartment units to be followed by 80 to 320 condominiums and 158 hotel units. These components, plus the new city hall, library, and police headquarters, would surround a central town square in a manner similar to that found at Sugar Land Town Square in Sugar Land, Texas, and Santana Row in San Jose, California, said Chris LeTourneur, chief executive officer of MXD.
The first project to be negotiated was with Hilton Hotels for a 162-unit Embassy Suites hotel. The hotel market was not exceptionally strong in 2010, but it was considered stronger than that for retail, office, or residential uses in the area. Some observers, including leaders of the master planning architecture firm later selected, suspect that it may have been a deal-driven decision because the city was willing to build the hotel itself and lease it to Hilton. LeTourneur suggests the hotel deal was important as a catalyst for further development.
With the market study in hand, Cottle hired a master planning architecture firm. She organized what she termed an open design competition to elicit an approach to the planning of Fairbourne Station, a new city center at the TRAX terminus named for the original blacksmith and general store owner Joseph Fairbourne. Cottle said she was impressed with the approach of Salt Lake City–based GSBS Architects because a component of the firm, GSBS/Richman Consulting, specializes in market and economic consulting.
Cottle’s determination to be market oriented and deal-driven led her and the master planning firm to take a generic approach to design of the master plan. “We didn’t know what the market would bear, nor how the market would recover,” Cottle says. “We didn’t know where the uses would fit best. Give us a master plan where the blocks of uses could be moved around so that as many uses as possible could fit in as many places as possible.”
The master plan that GSBS devised generally follows the mammoth scale of Salt Lake City blocks, which had been planned to be ten-acre (4 ha) squares, 660 feet (201 m) per side. Some blocks on the West Valley City site are over 760 feet (232 m) long. The ten-acre block on the northeast—across Constitution Boulevard from the mall on busy 3500 South and currently occupied by a 40,000-square-foot (3,700 sq m) Toys “R” Us outlet adjoining a 20,000-square-foot (1,900 sq m) Staples store—has been planned for 203,000 square feet (19,000 sq m) of retail space or an equivalent amount of office space. The retailers targeted for the site are expected to be compatible with the mall. That plan is fluid, however, because the city has not yet acquired the site. In particular, the city wants to attract a 40,000-square-foot (3,700 sq m) urban grocery store; two existing grocery stores are a mile away.
Immediately to the west of the retail/office area is the site of the lead public/private partnership project for the city—the 162-unit, eight-story Embassy Suites hotel, of which the city partnership plans to complete construction by the end of this year.
Because it was the city’s first project, the city chose to negotiate a deal structure favorable to Hilton to seed the rest of the development. The city is building and will own the hotel outright, subject to a 25-year credit-tenant lease to Hilton at the termination of which Hilton has the option to purchase the hotel. It is not a participating lease, but rather one in which the lease payments only cover the debt service on the $32 million, conventional loan at 5.98 percent interest to the City Redevelopment Agency to develop the hotel. The agency will lease the building to West Valley City, which will then sublease it to Hilton affiliate WVLI, a Las Vegas–based private company that is building the hotel. WVLI will operate the hotel and make the $208,551 monthly payments to the development agency from the date of opening until the loan is repaid, when it may exercise its option to purchase the building. WVLI, with with Hilton, then will have the option of paying the loan off early. The $32 million loan covers hotel construction costs, the purchase of the four-acre (1.6 ha) site from the redevelopment agency, and loan servicing. The site was purchased in 2010 by the agency for $4.1 million. Cottle acknowledges that the city does not expect to make money on the deal, but says it was critical to move the development forward.
The second project to be negotiated is with ICO, the subsidiary of large Salt Lake City builder Ivory Homes formed to develop, manage, and own the firm’s commercial properties. This project is for 225 rental apartments ranging in size from 650 to 1,160 square feet (60 to 108 sq m), with rents—projected in October 2011 to be $760 to $1,195 per unit—to go to the redevelopment agency. The unit mix is 55 percent two-bedroom units, 39 percent one-bedroom units, and 6 percent three-bedroom units. The apartment structures are four-story buildings with 256 parking spaces on the ground floor, yielding a 1.2-spaces-per-unit parking ratio, which will be low for the area. That ratio helps the project reach a density of 79 units per acre (195 per ha) on its 2.86-acre (1.16 ha) site.
The city purchased and demolished the small houses and businesses on site using tax increment bond anticipation notes and agreed to write down the cost and sell the land to ICO for $498,000. ICO negotiated a loan backed by the U.S. Department of Housing and Urban Development to build the $25 million complex, which is expected to be completed in 2013. According to reports, the city expects to realize an extra $2 million in taxes over the life of the redevelopment agreement, which expires in 2024.
Cottle seems to think like a developer: she is deal driven and detail-oriented. Having the city develop, finance, and own the hotel itself, against the Hilton lease and brand requirements, gave her considerable latitude to specify details that would appeal to her perception of market demand. Assembling and buying the land for the apartments gave her the opportunity to specify many details in the development agreement that accompanied the land sale to ICO. “We even specified the color of the granite to be used on the countertops,” she says.
Searching for leading office developers led her to Hines. But the city’s agreement with Hines to become a co–master developer is, at this point, a general one. Hines received from the city the exclusive right for an initial one-year period to make its best efforts to seek tenants to develop up to 200,000 square feet (19,000 sq m) of Class A office space. The city agreed to make its best efforts to assemble the land. The city is open to alternative deal structures and may negotiate a ground lease for development of the buildings by Hines.
West Valley City already has a city hall, a county library, and a public service building in the southeastern quadrant of the site. MXD Development Strategists suggested building new facilities in a 3.6-acre (1.5 ha) civic center site on the south side of its newly opened four-acre (1.6 ha) promenade that courses through the center. MXD thought those new buildings would open up the current civic quadrant for more intense office development adjacent to the new TRAX Green Line station, which is part of an intermodal transit center that includes a bus transfer station.
The GSBS master plan includes a proposed three-level, 375-space park-and-ride structure immediately south of the hotel and adjacent to the TRAX station. The central location of the parking structure permits some potential for shared parking among the hotel, offices, and apartments. The hotel site now has 163 surface parking spaces, yielding a parking ratio of one space per unit, and 50 surface spaces are located to the south on the Utah Transit Authority park-and-ride lot. Because hotel parking demand peaks in the evening and transit parking demand peaks during daytime, shared parking could be effective.
Most of the buildings in the master plan are single-use buildings. However, 26,000 square feet (2,400 sq m) of retail space is projected in the southeast office buildings and 54,000 square feet (5,000 sq m) of retail space is projected in the northwest apartment buildings.
The transition from a low-density, single-use, automobile-oriented suburb to a higher-density, horizontally mixed-use urbanizing center has challenged West Valley City. It is instructive to observe the power of images that the city has cited to envision its new urban heart. Cottle says the original vision of city leaders was to create a place like a Main Street lined with ten-story buildings—their perception of Portland’s Pearl District. However, three of that district’s buildings exceed that height, and early development of the Pearl was exclusively four-story buildings over podium parking. West Valley City Mayor Mike Winder terms the Promenade, “a four-acre linear green space promenade that will act as a mini–Central Park in our mini-Manhattan.”
It is interesting to observe that none of those involved in planning for the site seems to have questioned the scale of Salt Lake City’s ten-acre block sizes as inhibiting pedestrian-focused, mixed-use, urban, transit-oriented development. Neither Portland’s 200-by-200-foot (61 by 61 m) block sizes, nor Manhattan’s 200-foot (61 m) cross street lengths, nor Savannah’s fine-grained division of ten-acre (4 ha ) wards seems to have been noted in planning efforts.
Yet, West Valley City seems to have seized the entrepreneurial initiative to become its own master developer to create a new urban heart for a formless suburban area that had none. The assumption of public risk by the city—and Cottle—appears to be beginning to reap rewards.