SMART reluctant to turn over property to developer so he can secure financing

A proposed transit village with a food and wine center in Santa Rosa's Railroad Square may again be in jeopardy.

The plan is complicated by the combination of public land and a private developer, who says the project can't be financed unless he is allowed to buy the property now rather than when he is cleared to begin construction.

Mike Dieden nearly backed out of the deal last spring, also citing concerns about financing the $150 million development, a hub on the proposed North Bay commuter rail line.

Now, he says he can't get financing while he only has an option to buy the 5?-acre site, which is owned by the Sonoma Marin Area Rail Transit agency, the public group planning the rail line.

"In this real estate environment, it's close to impossible to attract private equity on a project that is totally unsecured," said Dieden, a Los Angeles-based developer. "If we are unable to secure the investors' investment with real property, they are totally at risk."

SMART directors, however, are reluctant to sell, saying they are afraid they would lose control of what happens with the property if they relinquish title before financing and a construction contract are in place.

"We are very leery about transferring title to the property early on and not covering our bases in our ability to get the project we want and a project in a timely fashion," said Bob Jehn, a Cloverdale councilman and SMART board member.

Dieden said he believes deed restrictions could be written into a sales agreement to protect SMART.

Dieden's latest proposal also includes combining efforts with the John Stewart Co. of San Francisco, which wants to convert an adjacent warehouse into live-work space.

To lose Dieden now would be a setback for both SMART and Santa Rosa, said Jeff Kolin, Santa Rosa city manager.

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