Building up 

Developer eyes blighted Intermountain Lumber site

Nearly 20 years ago, well before the Intermountain Lumber site on Russell Street finally shuttered in 2002, the city of Missoula identified those 12 acres as a potential industrial blight in need of redevelopment. The parcel became part of the city's second Urban Renewal District in 1991.

Despite the city's foresight, the Intermountain Lumber site has mostly remained a patch of bare and broken asphalt inside twisted fencing along one of Missoula's most traveled thoroughfares. The Missoula Housing Authority (MHA) purchased the property in 2003, and earlier this year it opened the $6 million Garden District, a low-income rental housing development on the property's southwest corner. But attempts to transform the parcel's larger street-front portion into a mixed-use neighborhood have failed.

Now another developer is about to try again.

On August 11, representatives of the Farran Group, a local real estate investment and development company, presented to the Missoula Redevelopment Agency's (MRA) Board of Commissioners a $17.4 million proposal that would fill the site with 196 market-rate apartment homes, 13,000 square feet of retail space fronting Russell Street, and land for future MHA housing and office facilities. The Farran Group and the MHA signed a buy-sell agreement last November, contingent on obtaining project financing—the greatest hurdle the Farran Group still faces.

click to enlarge The Intermountain Lumber site on Russell Street has sat vacant for years, but a local development group is trying to transform the parcel into the kind of mixed-use neighborhood the city has long envisioned. A huge hurdle stands in its way: money. - PHOTO BY CHAD HARDER
  • Photo by Chad Harder
  • The Intermountain Lumber site on Russell Street has sat vacant for years, but a local development group is trying to transform the parcel into the kind of mixed-use neighborhood the city has long envisioned. A huge hurdle stands in its way: money.

"One of the things we're very happy about," says MHA Director Lori Davidson, "is that without any prompting on our part they've come up with a site plan that really closely resembles what our original intentions for the property were. So we're very pleased with what they're proposing."

Last week, the Farran Group submitted an application for nearly $13 million in financial underwriting through a U.S. Department of Housing and Urban Development (HUD) program that insures mortgage loans to facilitate the new construction or substantial rehabilitation of multifamily rental or cooperative housing. Farran Group principal Jim McLeod, wary of discussing the project publicly until its financing is nailed down, says his group will know by the end of the year whether they've secured a loan through HUD's highly competitive program. It's far from assured, he says.

That's one of two monetary moving pieces. The other is whether MRA will help fund the project with tax increment financing, or TIF, a commonly used financial tool that allows cities to leverage a district's future tax revenue to pay for groundwork today.

"The important key here is what this site will do to the tax base...," McLeod says. "There's a real benefit to having the private-public partnership on this."

The TIF funding would total $952,000 and cover public aspects of the project, like site demolition, road improvements, sewer mains, storm drains and landscaping. Part of the purpose of last week's presentation to the MRA board was for the Farran Group to obtain preliminary confirmation that such improvements would be eligible for TIF funding, an assurance requested by the banks. MRA issued what Assistant Director Chris Behan describes as a "comfort letter."

McLeod may be guarded, but others are giddy about the project's prospects.

"What we know here is that we have a developer that is local to Missoula, understands this community, and has already developed property and made it work," says Dan Kemmis, an MRA board member and former Missoula mayor. The Farran Group developed Copper Run Apartments on Great Northern Avenue and Canyon River in East Missoula. "So on that basis, I think there's reason to be optimistic about this."

Says MRA's Behan: "They're very serious developers and they wouldn't have brought it this far without being extremely serious and thinking that they can put it all together."

The design includes seven residential buildings, two commercial buildings, a clubhouse and a new road, Milwaukee Way, bisecting the site and connecting Catlin and Russell streets. McLeod says his group is exploring the cost effectiveness of LEED (Leadership in Energy and Environmental Design) and NAHB (National Association of Home Builders) green building standards, but at minimum will incorporate Energy Star appliances, zero VOC paints and carpeting, and light-colored roofing to reflect heat. They're also considering a community garden and a car-share program.

What the proposal doesn't include is an underground parking garage, which Behan calls "the development's only downside." But there's a good reason why: Its cost might've been what sank MHA's initial proposal.

"We're going to end up with more asphalt here than we'd hoped," Behan says, "but they've done a pretty darn good job of masking it from the general public. We try to be as efficient with land as possible, and parking lots are inefficient, but I think they've done the best they can."

Should the Farran Group receive financing, McLeod says construction could begin in late spring or early summer 2011.

"These are just such challenging economic times that I'd be hesitant to predict that this will happen in the near future," Kemmis says. "But I very much hope that either this proposal or something very much like it will, before very much longer, transform that very important inner-city site."

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